Warranty Week Newsletter Archives

Because so many extended warranty programs are run by small private companies or by huge companies that don't break out their service contract revenue, it's almost impossible to size the business accurately. This week, we're looking at data from three industry leaders, Assurant, Frontdoor, and Lowe's, to get a sense of the state of the American service contract industry.

In 2023, the global airframe OEMs paid $1.18 billion in warranty claims, set aside $1.07 billion in warranty accruals, and held a collective $6.76 billion in warranty reserves. It's remarkable that claims paid exceeded accruals made, a finding that would be more concerning if we hadn't taken a closer look at Boeing's expenses to find additional hundreds of millions deposited as changes of estimate to accruals made in previous years.

SunPower just filed for Chapter 11 bankruptcy in August, leaving behind ongoing 25-year product warranties, for which its suppliers are now on the hook. On the industry level, it seems that the claims rate exceeding the accrual rate is becoming a concerning new norm.

The first annual Warranty Innovation Awards were bestowed on five recipients at the Extended Warranty & Service Contract Innovations conference in Chicago this week. We caught up with the winners and learned their best practices for success in the warranty and service contract industry.

Hyundai and Kia had another tough year, marked by recalls of millions of their vehicles. On the back of a 2022 also filled with recalls, the warranty expenses of the two South Korean vehicle manufacturers are higher than ever. Tata, on the other hand, has become consistent in its warranty accounting, years after its acquisition of Jaguar Land Rover.

Some manufacturers defy categorization into an industry group. Many of them still offer product warranties, for goods including vapes, exercise equipment, jewelry, oil and gas infrastructure, water management, domestic robots, coolers, body cameras, and tactical gear.

Many of the familiar names in the U.S.-based telecom equipment industry have gone bankrupt, been acquired, or gone private in the past decade, leading to a decline in the industry's total warranty expenses. However, based on the dropping warranty expense rates since 2018, it seems that the companies that remain are spending a lower proportion of their sales revenue on warranty expenses than ever before.