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Extended Warranty Biz Extends Beyond Warranties

Customer support becomes hypercritical in the era of connected tech.

This report appears in a TWICE Guide To Warranties supplement in the March 11 issue.

Extended warranties have long provided tech and appliance retailers and manufacturers with a high-margin, value-added product that, for many merchants, could make the difference between black or red ink for the year.

But just like the businesses they serve, extended service plan providers found themselves caught up in the same Sturm und Drang of price compression, e-commerce migration and industry consolidation that has rocked retailers and their vendors in recent years.

See: Retail Retrenchment To Continue Into 2019

As a result, the playing field has shifted within the extended service sector, with Assurant acquiring The Warranty Group, AmTrust spinning off its Warrantech and AMT Warranty businesses to The Amynta Group, and Allstate acquiring one-time warranty upstart SquareTrade.

At the same time, falling price points on TVs and other otherwise high-ticket fare have forced providers of extended service plans (ESPs) to develop new programs and step up their customer-support game as the advent of smart homes and connected technologies places additional stress on consumers and the retailers that sell those products.

For the aforementioned SquareTrade, innovation has taken the form of two recently-introduced home service programs: guaranteed in-home repairs within two days of reporting a problem, and a one-visit guarantee. “We either repair your TV in one visit or replace it,” CEO and co-founder Ahmed Khaishgi told TWICE.

See: Pain In The Glass: SquareTrade’s Durability Challenge

But looking beyond repair/replace programs, Khaishgi noted that “The concept of protection is broadening rapidly, applying not just to products but to data protection and tech support.” To that end, and leveraging its corporate parent’s considerable checkbook, SquareTrade made two recent strategic acquisitions of its own: PlumChoice, a tech support solutions provider specializing in setup, connectivity, IoT devices and Cloud services; and iCracked, which provides rapid on-site smartphone and tablet repair in over 60 U.S. and Canadian metro areas.

The additions, along with access to what Khaishgi described as Allstate’s own “supermarket” of products, is allowing San Francisco-based SquareTrade to offer “a continuum of services” that’s unique in the marketplace, he said.

Similarly, New York-based Assurant has learned through consumer research that end users require more than break/fix coverage in the age of connected devices. Ever focused on the consumer (“It always, always, always begins and ends with the end customer in mind,” stressed Assurant’s U.S. Connected Living president Jeff Unterreiner), the company has invested time, money and sweat equity in providing a comprehensive solution to device interoperability.

“We’ve been attacking that aggressively over the last few years,” Unterreiner told TWICE, beginning with consumer research and collected learnings from the company’s tech support center in Albany, Ore. That led to the opening last year of the Assurant Atlanta Tech Support Center in Georgia, and a model apartment there that’s packed with hundreds of connected devices, from Wi-Fi routers and wearables to gaming consoles and Google Home. “It’s critical to understand IoT from a consumer perspective, and we want our associates to have the ability to connect these products and get it right for them,” he said.

That’s not to say that Assurant has turned its back on break-and-fix programs. “That’s still the core,” Unterreiner noted, “but the consumer has needs prior to and after installation.”

That last piece of the equation — the post-purchase experience — is an opportunity that hasn’t been lost on Jacksonville, Fla.-based Fortegra. Beside serving regional chains and national accounts like Rooms To Go, Wayfair and Macy’s, the company is also building out its after-sale business to non-retail customers through its B-to-B 4warranty operation.

“The brick-and-mortar retail business is steady, but there’s not a lot of growth,” observed Steve Davidson, warranty products group VP. So 4warranty widens the net by providing bundled appliance, tech and whole-home coverage to alternative clients like OEMs, utilities, cable companies, realtors and affinity groups like AARP.

“We try to cover underserved markets; that’s our sweet spot,” Davidson said.

Related: How To Catapult Your Wireless Revenue

In another twist, Fortegra also provides insurance backing to its extended warranty rivals. Like SquareTrade and Assurant, the company is fully integrated with its own insurance arm — corporate parent TipTree Financial — making it an end-to-end resource, and a place for other third-party administrators to go for their underwriting needs.

“We partner with our competitors and compete with our partners,” Davidson said.

At the other end of the corporate spectrum is New Leaf, an independent administrator now in its eighth year. Co-founded by former Warrantech president Sean Hicks and underwritten by Fortegra, Irving, Texas-based New Leaf has ridden out the tumultuous times by sticking to its core mission: helping the independent dealer compete against big-box stores and thrive.

“The big guys were abandoning the independent channel, which can be as expensive as serving a 1,000-store chain,” CEO Hicks observed. While the global corporations fought over national accounts, “We knew our targets and stayed in our lane, and were fortunate to pick up regionals and independents like AJ Madison, Ferguson and Karl’s.”

See: Samy’s, New Leaf Sprout New Partnership

Hicks said New Leaf helps smaller dealers “go against the big dogs” by providing extended warranty products that can “help them improve their brands and make them look and act big” through services that include regulatory compliance, custom programs, in-house troubleshooting, and third-party repairs and/or replacement plans. The service plans provide peace of mind to both the consumer and dealers like Debbie Schaeffer of Mrs. G TV & Appliances, who credits attachment sales of New Leaf contracts for added profitability in these times of diminishing price points.

Looking ahead, Hicks foresees a great rest of the year for independents and for New Leaf. “The independent dealer is winning the Sears drama,” he said, “and the better educated consumer is going to their local merchant for the right experience. And my boat rises with them.”