Jan 4 2024
Warranty businesses serving the automotive industry are facing many of the same challenges impacting insurance companies, including price inflation for parts in both direct and 3rd party markets, supply chain roadblocks, and significant increases in claim severity. These issues are compounded by a pandemic-induced decrease in new car sales, all contributed to the warranty industry experiencing a 2.7% decline in revenue year-over-year per Consumer Affairs.
The good news for warranty companies is that there appears to be a clear path to rebound. The same Consumer Affairs report finds that consumers are increasingly looking to extend their cars’ usable lifespan and typically cannot afford costly repair bills without coverage. This points to an increased and sustained demand for warranty coverage as the population of vehicles in use ages. However, to maximize the profitability of these warranty policies, vehicle risk assessment models used to price warranties will need to be updated and future-proofed for the latest technology developments to maintain their accuracy.
AmTrust’s 2023 Extended Warranty Advisor notes that an organization's ability to “gather and compare [data]” is at the top of the list for administrator practices to ensure balance in their claim severity. This data gathering is even more imperative as certain OEM brands' warranty claims and accrual rates are reaching new highs.
Unlocking the full VIN is the only way to ensure that policy and claims teams are consistently aware of all parts that exist within the vehicle. Accessing OEM build data ensures that all facets of the vehicle are available to the organization; providers such as DataOne are also able to normalize OEMs’ proprietary language into a universal format so it can be easily recognized by users and processed both quickly and accurately. This direct, granular insight ensures that your risk assessment is fully informed and mitigates unnecessary expenses.
The same AmTrust report also notes that access to high-quality vehicle imaging is essential for accurately adjusting a warranty claim. Individually photographing vehicles to evaluate coverage is not feasible, but DataOne has incorporated high-quality, vehicle stock image libraries into its suite of data offerings. These vehicle photo galleries are trim-specific and can be manipulated to show all angles of the vehicle. Warranty professionals can consequently gain a comprehensive understanding of the covered vehicle beyond the VIN.
The DataOne blog has commented extensively on how a full transition to electric vehicles on America’s roadways is inevitable, and that means auto warranty businesses need to gain a complete understanding of the fundamental internal differences between EV and ICE (internal combustion engine) vehicles. Automoblog has noted that EVs’ increasing presence on roadways has a twofold impact on warranty providers. The first is that early adopters are approaching the end of their factory warranties, and significant demand for an extended warranty is on the horizon. The second is that ICE and EV vehicles have fundamental structural differences (such as far fewer drivetrain components in EVs) that make risk assessment models based on ICEs outdated.
Automoblog further notes that some warranty providers are actively taking the lead on offering EV-specific warranties; all providers will need to learn how to tailor EV-specific policies if they wish to remain competitive and profitable. DataOne has already actively worked to model its EV-specific data to meet any needed use cases, and engaging with a data provider with the dedication to personalize its data to meet your risk modeling needs provides a necessary advantage for maintaining profitability and market visibility.
While the warranty industry experienced a downturn at the start of the decade, it is poised to rebound due to monumental shifts in consumer behavior and providers need to have the proper risk assessment tools to avoid unnecessary revenue leakage and develop appealing policies. DataOne offers intuitive build data presentation, vehicle imaging integrations, and dedication to emerging markets to assist warranty businesses in taking the lead in the new automotive landscape. If you would like to learn more about DataOne’s vehicle data services for warranty companies, you can reach out to one of our experts at the link below:
