Equalizing the Risk of Accident Damage Coverage

This is the time of year when we celebrate the freedoms and joy of being an American. Of course one of the cornerstones of living in an open society is our free enterprise system. Anyone can operate a business and sell products or services at a competitive price for profit.

In a perfect world, this system would always be a win-win situation. Unfortunately, business is never perfect, and there is always a chance someone will end up on the short end of the stick. This is particularly true for those involved in supporting accidental damage claims for electronics, such as laptops and gaming devices.

As a competitive selling point, some manufacturers, retailers and extended warranty companies offer Accidental Damage Coverage (ADC) for laptops at very attractive
pricing for up to three years.  Laptop repair companies contract to perform warranty repairs, many times at flat rates that barely cover their costs. The pressure is on them to control costs while meeting aggressive turn times and maintaining some measure of profitability.

With ADC comprising everything from drops/falls/collisions to liquid spilled on a unit, the potential for repair volume is immense. The potential for fraud is also great.
As a three-year warranty is close to expiring, it would be awfully tempting to drop a laptop and game the warranty system to upgrade to a newer model.

Under the current scenario, consumers are winning with expansive coverage at low cost. ADC warranty issuers are winning by diverting risk to others. At some point, support organizations may find this work to be cost-prohibitive with all risk and little to no upside.  If warranty issuers opt not to adopt a more cost-effective repair model, they could be forced to replace more units.  In the end, the retailers, warranty providers and support companies must all make sound and responsible offerings and business decisions that enable everyone to be successful.

For the system to work fairly, warranty risk has to be spread evenly. Pricing for repair contracts should be carefully evaluated to ensure service companies are justly compensated and are not assuming the brunt of the risk.  It’s the responsible thing to do and the right thing to do to help all parties end up on the winning side.