Sean Stapleton, president & CEO of Warrantech, recently took part in TWICE magazine’s roundtable discussion on the state of the extended-service contract industry. The following is his response to the challenges and opportunities that lie ahead.
What is the greatest challenge facing the extended-service contract industry?
A significant challenge faced by our industry continues to be retail margin compression. As a result of the fierce competition between retailers for customers, retailers have few choices but to generate savings in other parts of their businesses. Extended service contract programs are certainly high on the list of many retailers as an opportunity to retain additional revenue. The result is that administrators and their respective underwriters are forced to try to become more efficient or reduce claims funds to compete.
While competition should be seen as a positive force in business, this continued underwriting pressure could lead to administrators underpricing programs to win opportunities. This will likely result in programs being underwater, thereby leading to frantic attempts by the administrators and their underwriters to reduce both administration expenses and claims costs. The likely downstream effect will be negative customer experiences and further diminished customer loyalty.
Conversely, where do the industry’s greatest opportunities lie?
The greatest opportunity for our industry will be the development of protection solutions that allow customers to cover a broad spectrum of devices and equipment utilizing diverse payment mechanisms. Warrantech has developed solutions that better enable customers to purchase protection plan products in a convenient manner, covering more items, and providing additional value that ultimately will result in additional revenue and customer satisfaction for our partners.
What is your biggest takeaway from last month’s International CES?
The consumer appetite for connected products is gaining momentum at an astounding pace. Manufacturers are clearly listening to consumers and are focusing their efforts on smart products, which are able to communicate and synchronize in ways never before imagined.
With this enhanced communication functionality being developed for devices, we believe that consumers will demand a unified platform that can seamlessly monitor, control and report back to the consumer on the status of their connected equipment.
The next logical step will be a protection solution that is able to provide coverage for each connected device. In order to provide a comprehensive single solution, providers of protection plans will need to be able to provide protection for connected products ranging from smart appliances, televisions, mobile devices and even automobiles.
Please share any new programs or services that would be of interest to our readers.
AmTrust [Warrantech’s parent company] has been an innovator in the telematics space with regard to protection offerings. Last year we launched our Connected Protection solution, which provided vehicle service contract purchasers with the ability to protect mobile devices connected to their vehicle’s WIFI network.
For 2015 we plan to provide our retail partners with the ability to offer monthly protection plans to their customers, which will provide comprehensive protection for an extensive array of equipment owned by the customer. Customers will enjoy additional benefits for products purchased through the retail partner, including disappearing deductibles and in-store service. The goal is to drive both recurring protection plan sales and traffic to the participating retail partner’s stores. The offering, known as our Loyalty by Warranty™ program, will provide retailers with an innovative way to increase revenue as well as customer loyalty.
Visit twice.com to read the extended service roundtable discussion in its entirety and for more industry insight.