Nick Wake, Sales Director, gives his opinions on whether our dealer partners should be offering and actually selling extended warranties online, and why/how:
Traditionally, it has been largely true that dealers have preferred that extended warranty sales remain the preserve of the point of sale. However, in a changing market, we are encouraging dealers to look again at their approach to extended warranties and to the opportunities afforded digitally; after all we are all operating in an online world increasingly.
Online is not the only route that AutoProtect is campaigning to encourage dealers to review their operating position. Regulation in tandem with digitisation has led the business to highlight opportunities for development. Opportunities for the product, product scope and distribution are all the subject of dialogue with dealers right now.
The challenge facing all direct to consumer warranties is the risk of adverse selection. Customers opting for an extended warranty online can display higher claims ratios. They may be purchasing based upon insight about a potential problem or simply recognise that an ageing car is more likely to develop a fault. This self-selection bias is a factor that can impact pricing.
With some dealers opting to use self-funded warranty products to cover their statutory warranty requirements, rather than a full MBI product, the attraction of offering an extended plan across all platforms, with the associated liability potential, has understandably been limited. However, regulation and digitisation may have some dealers re-thinking their use of such an option and this could have implications for online and point of sale warranty offerings.
The Consumer Right Act launched on 1st October 2015, has created increased focus upon dealer responsibilities post sale. It may have dealers questioning the appropriateness of self-funded warranties, both as a means of supporting consumer rights and as a method of differentiating the dealer offer. A full MBI offer is arguably more attractive in this regard.
Offering more than a basic three or six month warranty can differentiate a dealer and provide cover that extends beyond the six month period within which the onus is on the dealer to prove issues were not present in a car at the point of purchase when a consumer makes a claim. More than this, it can create a higher level of consumer confidence in a dealer’s car.
A longer warranty promoted as part of a dealer’s online sales platform, backed up by the type of quality endorsement provided by the video suite and online claims process provided by AutoProtect can create increased value in the dealer proposition, differentiating the business and its range of cars. It moves the debate away from just price and towards trust. Similarly, a long-term warranty can aid retention.
The market has moved on. Some dealers moved to self-funded warranty products rather than MBI because of FCA regulation. By offering Appointed Representative status, we have shown we can help dealers to manage this situation effectively. It is also true that the wider market has moved on as well.
Dealers should make more use on a long term MBI product as a retention and differentiator tool. They should also start testing online strategies that use warranties to connect to customers. Right now, guarantee products can act as a natural barrier to this progressive approach, a return to traditionally MBI built for the digital age could offer dealers many benefits and less risk than their current approach