We sell programs that aren’t typically offered online.  In your quest for information online—have you seen a lot of programs that look a lot alike?  That’s because there are only a couple of companies that do a lot of direct selling and many secondary sites merely are add-on referral sites to the primary site.  These companies sell direct because they don’t have as much retail (dealership) business on the books, making it difficult for the consumer to buy the same types of programs without purchasing through a dealership.

Our programs are the most restrictive in terms of eligibility.  We do not offer extended service contracts on vehicles that are more than a few years old.  This ensures that the unit is in sound operating condition at the time of contract sale.  We know this does not allow us to write contracts for most people.  The advantage is that if your unit is new or nearly new, we can provide you with great coverage from a stable company at the most competitive rates.

Many companies offering extended service contracts online are selling contracts backed by Risk Retention Groups (RRG).  Many websites try to conceal the fact that they are RRG’s or put a “spin” on it to make it look like something other than an RRG.    I have no issue with a company providing a service contract that is backed by a RRG.  The issue I have is when they try to conceal the fact that they are backed by an RRG.  These companies that are backed by RRG’s are not bad companies. These companies just aren’t able to claim the same level of protection as a fully insured carrier.  RRG’s are not subject to the same scrutiny as an actual insurance company.  They usually don’t need regulatory approval for rates or forms, have no minimum premium requirement, have little or no investment restrictions, and can be setup with very little cost.

RRG’s are setup to avoid the cost of a fully insured program. The biggest advantage is that they can grow very rapidly since they are not restricted to the amount of premium they can write.  A typical well-managed insurance company will not write more than two times their capital and surplus base, which is what A.M. Best uses to measure insurer solvency.  This creates an environment that a RRG’s rapid premium growth can outstrip their ability to adequately fund their policies in the event of a shortfall in loss reserves.  As long as their volume continues to increase, they are always ahead of the curve.  But as soon as volume drops, things can go upside down very quickly.  They also have the advantage of being very quick to market with new programs and pricing since they usually only need to file in their state of domicile.  They are usually domiciled in South Carolina or Hawaii since these states have very “progressive” captive insurance laws. You can recognize most of them by looking for the terms “insured and re-insured” making it seem as if your are insured twice.  That is not the case!  Allow me to explain:

The primary insurance carrier is usually a company that you have never heard of because they are usually owned by the service contract company.  They are responsible for paying the claims initially, known as contractual liability insurance.  The secondary insurance is referred to as an Excess-loss or Stop-loss policy which kicks in when an agreed upon amount has been paid out by the primary carrier agreed upon by both parties.  This amount can be set in the millions of dollars. The secondary insurance company is usually the only name with an A.M. Best rating, so they advertise this company and its’ rating (also since A.M. Best doesn’t rate RRG’s).

When an RRG becomes insolvent there is no guarantee fund or other safety net for dealers or contract holders.  What really aggravated me was when many of the online companies that were selling service contracts that went out of business were selling different contract within DAYS of bankruptcy or dissolution.  These online service contract sales companies would tell their customers “We are sorry that the service contract you purchased from us is no longer valid, but it’s not our fault that they went out of business; Can we sell you another one from a different company?”  The nerve of these companies was simply astonishing.  It is not hard to find information about companies that have gone out of business.  Simply do a Google search on “warranty bankruptcy.

WE HAVE NEVER SOLD AN EXTENDED SERVICE CONTRACT THAT HAS GONE OUT OF BUSINESS.

There are 16 RRG’s that have formed to provide contractual liability insurance for vehicle service contracts under the 1986 Liability Risk Retention Act.  Of these 16 RRGs, two have been declared insolvent and placed in liquidation (National Warranty Insurance RRG andPrimeguard Insurance Company, Inc. RRG).  10 of these remaining 14 companies were licensed from the year 2000-2005.  That is not a very long track record in which to deem stability since a lot of contracts are for 7 year terms.  This means that most of these companies have not even seen one full claims cycle.

Ultimately, the consumer will decide which type of contract they are comfortable purchasing.  We feel customers need to be given accurate information regarding the difference to make an informed decision.

We have warranty relationships with most service contract providers.  We can provide you with information and quotes for ALL types of contracts, including ones from RRG’s.  We will accurately disclose the type of insurance policy that backs each policy.

We feel having quotes from both RRG’s and fully insured carriers is the best way to compare programs.  Our customers choose our fully insured programs over 95% of the time after they see the small price difference between programs.  Sometimes the price difference is small, within 50 or 100 dollars.   We give you, the customer, accurate information so YOU can decide which program is right for you.