Dealer Beware: Manufactures costing your Reinsurance Company $

Dealer Beware: Manufactures causing your Reinsurance Company to pay for known issues!

While the boom in recalls could potentially be good for business, there’s one issue becoming all too common that could be costing you money.  Recently manufacturers are asking “Does the customer have an extended Warranty” before they agree to fix known issues. Traditionally, the manufacturer pays for breakdowns caused by faulty known issues, recalls and bulletins or campaigns announcing known faults for customers. Somewhere along the way, someone at the factory came up with the idea to start asking the customers if they have an extended warranty or third party warranty with the desired intention of stepping away from the cost of the problems.

There are a number of reasons that dealers owning their own reinsurance companies and the administrators should not allow manufactures to do this.  First being Implied Warranty, once you agree to make a warranty repair for a customer beyond the scope of the stated warranty, you create an implied warranty that must then be upheld for all claims with a like issue. The manufacturer can’t pick and choose the ones they agree to pay for based solely on the fact that there may be someone else willing to pay. A Warranty is free and can only come from the manufacturer or seller of an item and when you have an implied warranty, you cannot ask for a customers extended service agreement that he paid for to take on the obligation of the manufacturer’s warranty.

As the owner of the reinsurance company, the dealer ends up getting charged the cost of the obligation of the manufacturer.  If you look at any extended warranty agreement, they contain the language to exclude items that are the responsibility of the manufacture warranty. Some go into more detail allowing them to subrogate against the manufacturer for items that are generally warrantied items.

Owners of reinsurance companies need to be proactive in getting the manufacturers to stop this practice.  Many dealers don't really realize it's going on.  Dealer principals often don't inform the service managers about their owning a reinsurance company and therefore don't create a way to hold the service manager responsible for reinsurance company profitability.   Service managers and service writers are paid on profit of the store, not the reinsurance company or VSC business so they don't care to fight the factory.  Plus, a factory warranty claim pays less money to the service department than the outside VSC would pay.  So service departments like to make claims through the VSC as it pays them as much as customers pay.

Your best line of defense against incurring unnecessary expenses to your reinsurance company is going to be awareness, vigilance and fighting back against the factories that partake in these practices. The team at Automotive Assurance Group are industry experts on Reinsurance Companies, their formation and helping dealers determine what the best fit is for their businesses.  For more information contact Automotive Assurance Group today at 844-242-6626.