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Warranty Cos. Address Concerns Over Service Plans

New York – A favorite topic of consumer advice columns and broadcast news reports has long been the merits of extended service plans (ESPs).

Most, led most vociferously by Consumers Union through its Consumer Reports magazine, generally advise shoppers to take a pass on protecting their consumer electronics and major appliance purchases past the manufacturer’s warranty period (although the non-profit group now recommends extended coverage on notebook computers and flat panel TVs).

Not surprisingly, providers of extended service plans beg to differ on the merits of their products and value-added services, and believe such media reports do a disservice to consumers. But how can warranty companies convey their counter-arguments to end-users, and the retail sales associates who sell them?

For NEW Customer Service Companies, the answer lies in training and education. “NEW has long been a supporter of the customer knowing as much as possible about their service plan choices,” said Danny Hourigan, service plan division president. “To that end, we have an industry-leading training team that stresses honesty with the customer, that teaches selling behaviors that focus on qualifying the customer (placing the right product in their home) and on helping the customer understand how to protect that purchase.”

NEW’s training sessions also provide store associates with “all of the information needed to answer customers’ questions and objections, including what Consumer Reports has to say,” Hourigan said.

Kevin Rupkey, president/CEO of Bankers Warranty and its new VAC Service Corp. subsidiary, believes the media attention on extended warranties is misguided and, in fact, unwarranted. “It’s really unfortunate that extended service plans seem to have gotten a ‘bad rap’ in the media,” he said. “I’ve seen articles that say service plans are not worth the expense. One can only say that they are worth it if you are one of the millions of people who have experienced a product breakdown. Service contracts help protect consumers from the unexpected.”

Matt Frankel, president of AIG Warranty, dismisses the media reports as nothing new, and says consumers have replied with their wallets. “Customers want extended service plans for peace of mind and long-term assurance,” he said. “But the value is both perceived and real because we spend hundreds of millions of dollars on repairs that would otherwise have been borne by the consumer.”

Mike Frosch, president of Aon Warranty Group (AWG), North America Non-Automotive, agrees. “AWG’s extended warranty programs are delivering great value to the consumer as technology continues to advance. In addition, new enhancements to extended service contracts including accidental damage clearly differentiate a simple break-fix plan, providing the peace of mind the consumer wants when buying a new product. It’s important to remember that as much as consumers love their computers, MP3 players and TV’s, they don’t want to be without them if they break. That’s when they need us most.”

That’s the message Bruce Saulnier, president of AMT Service Corp., wishes sales associates would deliver to prospective purchasers of ESPs. “Evaluate how important the use or availability of the item is to them,” he suggests, “and then be sure that the ESP offers the appropriate terms and conditions, such as accidental damage and replacement, if the consumer can’t afford to be without the item for an extended period of time.”

Sean Hicks, president of Warrantech Consumer Product Services, observed that Consumer Union’s amended advice “actually has been a nice lift for our industry. If you don’t understand the inner workings or can not afford to be without your product for financial reasons, then you need the extended warranty. One repair pays for the warranty on just about any product.”

Doug Tudor, president of Warranty Corporation of America (WaCA), now part of Asurion Corp., concluded that “Regardless of any bad press in the past, consumer demand proves that people want to protect their expensive, complicated product purchases with service plans. They want their products to be repaired or replaced without significant out-of-pocket expenses. That’s the key in training our client’s sales associates. Consumers understand that they pay to protect their health, homes and automobiles, and extended service plans offer the same type of coverage on their CE products.”