Warranty Company

Warranty Company: Pick the best Warranty Company for your business

Warranty Company

  1. What is a Warranty Company?
  2. How does a Warranty Company Differ from an  Insurance Company?

  3. How does a Warranty Company Develop Warranty Plans?

  4. How does a Warranty Company Execute Service Fulfillment?

  5. What are the Top Reasons to Select a Warranty Company?


What is a Warranty Company?

A warranty company provides warranty services related to warranty plans or policies. warranty companyWarranty services which warranty companies offer include underwriting of OEM warranties as well as extended warranties and service contract programs, warranty plan development and service fulfillment, service technology and even logistics.  Warranty companies develop warranty plans for manufacturers, retailers, service providers, and consumers, direct.  Warranty companies typically structure programs based on products and product price points.  They also consider coverage features in creating their plans, including fulfillment type, ie repair versus maintenance, term of coverage (years), whether the plan is an extended warranty or DOP (date of purchase) service contract, as well as inclusion of maintenance or other features like food loss, configuration, ADH or theft/loss.

How a Warranty Company Differs from an  Insurance Company

Warranty plans are generally underwritten by insurance companies, either directly through their own warranty company, which is generally referred to as a plan or third party administrator , or through third party administrators like OnPoint Warranty.  Insurers, often in this case referred to as called obligors, provide the underwriting required in most states to back or guarantee a service contract or home warranty.  Basically, the insurer provides a premium fee to the warranty plan reseller which is paid to the underwriter when the service contract or extended warranty is sold.  The premiums paid to the underwriter are 'reserved' in accounts for future losses.  As warranty service events occur and are managed by warranty plan administrators, insurers pay for the cost to repair or fulfill other contract features from the reserve. 

Warranty companies or administrators can be the same as or different than an insurer or obligor, based on how they are licensed.  There are 2 types of licenses: administration licenses and obligor licenses in the USA.  warranty companyA segment of states require registration to be recognized as an warranty company administrator, which currently includes:  CA, ME, NY, TX, UT, and WI.  Warranty company administrators execute warranty plan coverages but are not obligated legally to pay for services promised. Obligor licensing is much more arduous and requires a significant amount of information about the business and its owners as well as bonding in some states. Again, the obligor is on the hook for paying for services promised, whereas the administrator or warranty company is responsible for execution and delivery of services, and the consumer experience.  

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How Warranty Companies Develop Warranty Plans or Warranty Products

Warranty companies develop warranty plans considering the elements above in addition to the frequency and severity of repairs and age of product in developing the plans, particularly plan pricing.  Frequency is the rate at which a product fails, expressed as a percentage, while severity is the cost to fix the product, expressed in currency. Frequency X severity equals the loss cost of a contract and is the amount of money the obligor expects to spend honoring the contract. Great warranty company actuaries are able to use market research and claims history to estimate loss costs well, ensuring warranty plans are priced correctly and able to cover expected losses. 

Administrative costs, including taking calls/chats from consumers, recruiting, vetting, managing and dispatching service providers and job management are layered on top of the loss costs and margin required by the obligor or insurer, and make up the wholesale price that the reseller must pay the warranty company to sell the contract. Resellers mark up the contracts to cover their own margin requirements.

How a Warranty Company Execute Service Fulfillment

Fundamentally, the need to service a product dictates that a warranty company such as a manufacturer or service contract administrator recruit, credential, onboard, contract with and manage a service network. Some warranty companies hire their own workforces and will provide depot, exchange or in field service fulfillment, while others will contract with third party service providers. Some use a combination of both.

A well managed warranty company service network is similar for warranties and for extended warranties and service contracts. Solid process, clear expectations, great support and cutting edge technology which offers omni-channel consumer entitlement and service scheduling, dispatching and claims functionality are critical to providing a super service experiences to every consumer. The processes can differ among the types of warranty companies related to the scope of products on which service must be delivered.warranty company

For instance, Extended warranty companies and service contract administrators cover multiple types of products and brands, ranging from appliances to electronics, computer equipment, mobile products to HVAC and even home systems like plumbing, electrical and foundations. So, the recruiting requirements are more complex, the licensing and credentialing requirements differ and more importantly the cost of service and time to deliver service varies greatly. Manufacturers tend to deal with a much more limited product and brand set.  However, warranty companies like extended warranties and service contracts administrators must use all of the tools mentioned above, given the more complex nature of their businesses to deliver awesome customer service experiences. Experienced warranty companies that understand the need to meet consumers where they are, on the web, in the call center and in social media, and have the service network and technology in place to manage it, deliver the best service levels to consumers, driving brand loyalty and future revenue. 

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Top Reasons to Select a Warranty Company

Use these four rules of thumb to pick a warranty company.

  • Experience

Rely on warranty companies which have extensive experience in the warranty service and warranty plan space. Experience in the creation, underwriting and sales of plans provides you with a partner who understands for innovative warranty products, the need for and risk related to non-compliance with state laws, and what you as a reseller of warranty plans- or a consumer- require to purchase.

  • Backing/ underwriting

Choose a warranty company whom is backed by A rated insurance companies, like Starr Companies, whom underwrites warranty plans for OnPoint.  Insurers have deep pockets, and the good ones maintain those deep reserves by using the latest in actuarial science to price warranty plans correctly.  Well priced warranty plans drive margin for warranty plan resellers and peace of mind for covered consumers. 

  • Execution

The rubber meets the road when a consumer needs service. Warranty companies need to execute warranty planswarranty service well to drive great customer experiences. Warranty service requires warranty companies to recruit, credential, onboard, contract with and manage a service network. Some of these entities hire their own work forces and will provide depot, exchange or in field service fulfillment, while others will contract with third party service providers. Some use a combination of both.

A well managed network is necessary for warranty plans to deliver great service. Solid process, clear expectations, great support and cutting edge technology which offers omnichannel consumer entitlement and service scheduling as well as dispatching and claims functionality are critical to providing a super service experiences to every consumer.  Warranty plans such as extended warranty and service contracts cover multiple different types of products and brands, ranging from appliances to electronics, computer equipment, mobile products to HVAC and even home systems like plumbing, electrical and foundations. So, the recruiting requirements are complex, the licensing and credentialing are necessary, the cost of service and time to deliver service are critical to maintaining pricing and profitability of the book, as well as great customer experiences, which drive brand loyalty and future revenue. 

  • Innovation

Choose warranty companies that offer more than simple break fix options. With the prevalence of handheld and smart technologies, warranty plans now can also offer additional services such as set up of mobile devices and networking products, installation and even 'how to' tutorials.   Uplifted coverage that coincides with the manufacturer's warranty, as well as extends protection through many years after product purchase, can include traditional power surge and no lemon, but it can also include ADH and theft/loss.

IoT is used by the most cutting edge warranty companies to identify additional products for coverage.  Simply by using technology a technician in the home or even a consumer with an app can 'sniff' out products connected to wifi and register them, creating a customized warranty plan which covers everything in the home. Subscription plans are an even newer concept. Revolutionary warranty companies enable consumers to define what they want covered, and modify coverage as their portfolio of products changes. This model makes monthy subscription payment options critical as the fee per month changes with what's covered!

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Frequently Asked Questions

What is a warranty company? A warranty company provides warranty services such as repair, maintenance or ADH on warranty plans such as service contracts and extended warranties. They may also deliver service guaranteed under a manufacturer's warranty.
What is a warranty plan? A warranty plan is an extended warranty or service contract which offers extended repairs or additional features and benefits not covered by the OEM warranty.
What is an Obligor? An obligor is responsible for funding obligations under warranty plans, extended warranty or service contracts. 
What is an administrator? An administrator is responsible for executing service obligations under warranty plans, extended warranty or service contracts. 
What is an underwriter? Underwriters are often obligors on warranty plans. They provide insurance which back the financial obligations of a warranty plan, extended warranty or service contract.
What is a warranty product? A warranty product can be described as an extended warranty or service contract which offers extended repairs or additional features and benefits not covered by the OEM warranty.
 What is an OEM? OEM is an acronym for an original equipment manufacturer and is another term used for manufacturers.
 What is an OEM or manufacturer's warranty? OEM warranties are promises made by the manufacturer related to product performance.
 What is an extended warranty or service contract? Extended warranties and service contracts provide extended break fix repair service for products sold by OEMs, retailers, and service providers. They often provide additional coverages not offered by the OEM.
What is ADH? ADH stands for accidental damage from handling and is a common addition feature of service contracts particularly on mobile handsets.
What is Theft Loss? Theft loss is also is a common addition feature of service contracts particularly on mobile handsets that covers the loss of a device. This warranty product often includes a deductible.
 Are service contracts insurance?  In some states and in Canada, service contracts can be considered insurance for a variety of reasons.
 What does underwriting mean related to OEM warranties and service contracts? OEMs must set aside a reserve or fund to cover the costs of anticipated or estimated warranty repair costs. An insurance company can step in and enable the OEM to offload this expense through insurance policies, impacting the balance sheet.
What is an ODM? ODMs are manufacturers whom build components, parts or entire products for other entities, which in some cases are branded by an OEM or retailer. Warranties and extended warranties and service contracts are valuable for ODMs because they enable ODMs to provide additional value to their customer and downstream consumers through enhanced service options.
What is service fulfillment? Service Fulfillment is the act of provide warranty services, including repair, maintenance, delivery and installation of products.

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OnPoint offers underwriting, warranty plans, extended warranties and service contract administration, service fulfillment, service technology and logistics.

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