“THE NEED FOR ON-SITE INSPECTIONS IN SUPPORT OF AUTOMOTIVE EXTENDED SERVICE PLAN CLAIMS ADMINISTRATION” Tom Powers Director, Business Development Magoo’s Automotive Consultants, Inc.
Purpose, Presenter, Magoo’s • Purpose: To highlight the “why?” and “how?” of vehicle inspections in support of auto warranty claims administration • Presenter: Tom Powers Director, Business Development • Magoo’s Automotive Consultants • 17 years in the vehicle inspections business • Tens of thousands mechanical inspections • A network of 4,000 skilled inspectors across the US, parts of Canada and other territories
Auto Warranty Industry $9 Bil. / Year 3rd-Party $2 Bil. OEM $7 Bil. Automobile Warranties & Extended Service Contracts The Automotive OEM Warranty & Extended Service Contract Industry Source: SEC Filings, Warranty Week
OEM Administrators • OEM warranty administrators have advantages – • Leverage through ongoing relationships • More established fees / service norms • Repair facility network (dealerships)
3rd-Party Administrators • TPAs are at a disadvantage – • Little leverage • Many one-off transactions • Across-the-board rates / service norms • Repair facilities that are motivated to maximize their repair revenue • Higher risk, greater potential for fraud, higher probability of inflated repair orders
Needed: An Honest Broker • TPAs need objective, 3rd-party inspections conducted by highly qualified mechanics • Most adjusters are NOT mechanics! • Most decisions need to be made immediately – people are waiting! • Every claim represents a potential angry customer and/or legal liability • In a perfect world, each adjuster could meet with all parties involved to reach a fair and mutually agreeable conclusion • In a perfect world …
ESP Administration:Orchestrating The Players • Car/Policy owner • Policy Seller • Administrator (Seller or TPA) • Repair facility • Insurer/underwriter • Inspection Provider
This Is Not “Voodoo!” The inspection/validation process is about identifying factual evidence and documenting the “cause and effect” the facts reveal
The Service – Fact Analysis • Mechanics report on-site to verify facts -- “cause of failure” and “extent of damage” • A written report with - digital photos … documenting the observed facts and the supporting expert opinion • Inspectors often call in “live” from the field, then secure, written reports are made available online within 24 hours
“Deny, Deny, Deny” Why not simply deny claims and put the burden of proof on the consumer? • Negative press • Bad news travels fast – especially via the net • State Depts. of Insurance: fines/sanctions • Litigation
Denial Companies … • They come and they go … • Mostly they go! • Sound business practices and repeatable standards lead to longevity and a solid reputation in the ESP administration industry
Best Practices • Establish Inspection Guidelines/Standards • Standardized Claims Validation Process • Utilize an unimpeachable 3rd-party Inspection Service Without a total commitment to claims validation integrity, the process breaks down!
Inspection “Triggers” • Dollar amount ($1,000 +) • Suspect Claimants (numerous claims) • Unknown/suspect repair shops • Suspect administrators (internal fraud) • Random testing for quality control
Why We Inspect –In their own words … • Quantifiable Savings - $400 for each $100 spent on inspections • “Soft Savings” – reduced litigation, fewer customer disputes • Supports the ability to make quick decisions – customers are waiting! • Builds a knowledge and experience base for handling future claims and designing new warranty products
Inspection ServicesFor Other Industries • Quick lubes • Insurance companies (garage policies) • Lease return / financial institutions • Consumers-to-Consumer (via Carfax) • Manufacturers • Home warranty inspections, etc. We provide eyes, ears, expertise, and a digital camera -- on site!
Right For Your Industry? • What’s the value of the average claim? • Owned, leveraged, known or unknown repair facilities? • High potential for inflated repair estimates? • Is the warranty highly prized in your product’s/service’s value proposition? • Do claims administrators need to make “on-the-spot” decisions over the phone?
What’s Around the Bend? • Live cams/reports via hi-speed wireless • GPS confirmation of locations • RF Tags • The sky’s the limit!