Briefing: Cost of living crisis warrants consumer cover rethink

By Jon Guy

Extended warranty covers have all too often received bad press, but the continued rise in claims inflation is breathing a new lease of life into the sector.

Warranty firm Intelligent Motoring has released the results of its latest research on pricing trends, which provides backing to the growing concerns from insurers over the cost of repairs and parts.

The company’s survey analysed extended warranty claims paid over five years and found that the average cost of warranty claims rose 37% between July and December 2022.

The leap comes with a warning that the rising costs of repairs were threatening to become the new norm in the coming years, with little on the horizon to indicate that supply chain pressures will ease.

Intelligent Motoring’s analysis found that the pace of the rise in costs began to gather momentum during the economic uncertainty that followed the UK’s decision to leave the European Union in June 2016.

Its research revealed that the costs of warranty claims rose by almost 20% over 2018 and 2019 – with 2020 to 2021 seeing another 10% hike in values.

Value-add importance

Duncan McClure Fisher, Intelligent Motoring chief executive, said: “Motor retailers and motoring services organisations looking to offer financial peace of mind to customers are increasingly recognising the importance of value-add products such as extended warranty and gap insurance.

“Motorists who are locked into an extended warranty programme benefit from protecting themselves against parts and service cost increases for the duration of cover, as well as being financially safeguarded from unplanned repairs.”

“Without doubt the majority were unprepared for the knock Covid-19 inflicted on the automotive sector – but the industry had been facing challenges even before the pandemic hit, meaning Covid-19 was simply another element that deepened those difficulties.

“The resulting financial impact on motorists is significant and has been made worse by wider pressures, including rising inflation and the overall increased cost of living.”

The same could also be said for those who are purchasing high-end electrical goods.

In the past, the discussion as to whether the customer would be interested in an extended warranty was brief and to the point.

Times have changed however – with the cost of living crisis continuing to bite, the extended warranty sector is seeing somewhat of a renaissance as consumers seek to indemnify themselves against rising costs.

Insurance is designed to deliver peace of mind when the unexpected occurs – for the motor and electrical trade, the uptick in warranty business is having a positive impact.