Fraudulent warranty claims can account for up to 15% of overall warranty costs and can cause businesses to lose up to 5% of their annual revenue.
An extended warranty, sometimes called a service agreement, service contract or maintenance agreement, is a prolonged warranty offered to consumers in addition to the standard warranty available on a new item. The extended warranty may be offered by an insurer, a retailer or a manufacturer.
Extended warranties are taken out by consumers as protection against the failure of, or damage to the new item, after the manufacturer’s guarantee has expired. It may be a renewable annual contract or a policy for a fixed period.
There are many types of goods that can be covered by extended warranty insurance including for example mobile phones, electrical products, motor vehicles, furniture, boilers and conservatories.
Extended warranty insurance policies are often based on the principle of indemnity, whereby in the event of a valid claim, the insurer is obliged to put the consumer back in the position they were prior to the loss or damage. This can be achieved by making the necessary repairs, replacing the item or offering a credit note or cash settlement.
What are the top 5 warranty management vulnerabilities?
The research also identifies the top five warranty management vulnerabilities:
1. Inadequate entitlement verification;
2. Weak user authentication;
3. Poor management of returned merchandise;
4. Improperly input base data (sale, service contract, serial number);
5. Lack of control or visibility into third-party service providers.
