However, the majority of consumers are mostly concerned with the price and reliability of the products which they buy. They expect them to have a reasonable working life. They accept that there may be a relationship between the price they pay and the lifespan of the product. The appliance they buy will come with a guarantee for a period of time. To receive cover beyond that time, consumers will often look to the security provided by an extended warranty, or that given by the repair protection industry.

Extended warranties have become a contentious issue in recent years. That is why AMDEA has been in discussion with the various parties involved, including the insurance companies which often underwrite these schemes.

Different points of view

Extended warranties involve the interests of different parties whose expectations vary considerably.

Consumers expect all-embracing cover, and are dismayed if told that for the price paid they cannot get it. This has led to media criticism of extended warranties as representing poor value for money. The truth is that - as in any form of insurance - you have to make a rational calculation about the probability of breakdown and the ratio of the price of the insurance cover to the cost of dealing with that breakdown. So to cover a product with a replacement value of say £200 with annual insurance costing £80 might seem poor value, although a £40 insurance cover may be perceived differently.

Retailers have a different perspective. Selling extended warranties may help to improve their relationship with the customer. However, the retailer needs a financial incentive to sell it. In fact, the profit from selling an extended warranty may be greater than the margin achieved on the appliance itself. It is important, however, that all parties involved act responsibly, and that warranties sold are appropriate to the needs of the consumer and the characteristics of the product.

Manufacturers also have their responsibilities. Often it is the manufacturer which undertakes the repair work required, and they must provide the highest possible standards of service. However, there are costs to be considered and kept under control.

Other dilemmas

In our discussions in AMDEA and with other parties we have considered the many reasons why there are problems - in addition to opportunities - in the world of warranties and repairs.

There are inconsistencies between what one warranty scheme will cover and another will not. This can cause embarrassment for the repair engineer (who might in some instances be obliged to request a payment from a customer who thought he/she was covered - for example in the case of accidental damage or no fault found). Clearly greater consistency in terms of what is covered would be desirable, as well as more comprehensive levels of cover. Insurance companies underwriting warranty schemes have pointed out, however, that this would have significant cost implications, and that we cannot ignore their need to make a reasonable financial return - like any other business.

Other points, which have emerged in recent discussions, include:

• Manufacturers/repairers should offer more help and advice via their websites or over the telephone to resolve problems wherever possible without the need to send engineers to do unnecessary jobs. Manufacturers and insurers should work towards on-line data and policy validation, so that it is immediately clear what items are covered and what are not. We must improve communications between all those involved - consumers, manufacturers, retailers and insurers.
• Most importantly, we must all be seen to be treating the customer fairly. Throughout the supply chain we have to ensure that our customers have faith in the products, which we sell them as well as in the aftercare that we provide to support them during their products' working life.

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