The Importance of Historical Data And How It Effects Your Extended Warranty Program
Extended warranties protect equipment in the future, so a lot of people – often even OEMs and dealerships – don’t realize the importance of historical data in developing a valuable, cost-effective extended warranty program. In fact, though, historical information plays an important role for everyone involved in the process.
What’s going on here?
OEMs compile historical data almost fanatically, for two reasons. It shows where future improvements are needed, and it enables development of realistic expectations in terms of performance parameters.
An extended warranty program is different from other insurance in a critical way. When you purchase homeowner’s insurance, you’re betting against the future – hoping you never experience fire or any other events that are covered. When it comes to equipment, you can be sure it will fail at some point. In this case, then, coverage protects against premature failure, not the fact of failure itself.
The more potential underwriters have to guess as to what could go wrong and when that could reasonably be expected to happen, the harder it is for them to pinpoint their potential costs. To protect themselves, they will have to charge more for your program. It’s in your best interests as an OEM or a dealer, to help them gather as much information as possible, so they can confidently provide you with a top-quality program at the best possible cost.
Since costs get passed along to customers, a more favorable extended warranty program not only saves you money, it boosts customer appreciation and satisfaction.
It’s a team effort.
To do their best work on your behalf, underwriters will want to see data that goes back 5 years from today’s date for all used units in your system, especially details of all claims. Beyond looking at what has happened in the past, prospective underwriters will also want to know why.
All equipment warranties are limited by a finite amount of time and/or number of service hours. They also require owners to use and maintain equipment according to spec. But the reality is that not all operators are equally kind to their machines, and some working conditions are inherently more “unkind” than others. An operator that allows a machine to sit around idling is ticking off warranty time as well as wasting fuel. A machine working in a gritty environment will wear out track components and other parts faster than one working on a firm surface.
Telematics both protect and “tattle” on you.
Today’s equipment is packed with electronic technology that automatically provides owners, OEMs and dealers with massive volumes of data. Among all that is pertinent detail that shows how the machine is being used and how it is responding.
On the plus side, telematics alert operators early if something is off. Taking quick action means you can head off potentially costly breakdowns and repairs, keeping machinery on the job and generating revenue. It’s also easier to stick with your regular preventive maintenance schedule. If the problem is caused by improper use, you can tell that, too, and retrain operators as needed.
On the flip side, poor operating and maintenance are recorded for all to see, not just the owner. When a customer files an extended warranty claim, there will be grounds for the underwriter to deny it.
In the end, it’s not just pricing but the quality of the underwriter behind it that assures your extended warranty program will bring peace of mind and financial value to you and your customers. Third-party opportunities available through ADI are backed by Lloyd’s of London, the world’s foremost insurance underwriter.