Today we received a question from a visitor to the site who wanted to know:
Is a manufacturer/seller of a product allowed to offer extended warranty without the necessity of an insurance company. I have been told that an extended warranty would be considered as an insurance product if the following are met: random risk / financial counterpart / service performed in case of damage. In such a case, only an insurance company can (legally) offer the extended warranty in the UK. Is this correct?
We decided it would be useful to the whole interweb if we answered it publicly rather than in an email.
Extended Warranty does not have to be classed as insurance
An extended warranty does not have to be classed as insurance. If it is classified as insurance it means the cover is protected by the financial services compensation scheme. In lay mans terms an insurance based extended warranty means a portion of the revenue they generate from the sale of policies need to be kept in a ring fenced place so that they can guarantee funds will always be able to pay out on the policies it has sold.
A company offering an extended warranty does not have to be backed by an insurance company. In this circumstance if the company providing the cover was to go out of business you would probably end up unlikely to ever be able to claim on the policy.
Comet recently went out of business and luckily for their extended warranty customers the extended warranty was administered through a 3rd party so the policies are still valid.
A great deal but not all extended warranties are backed by insurance.
Who underwrites which extended warranty?
To show you which extended warranties are underwritten by who, the list below shows you each underwriter and the companies they underwrite for.
Domestic & General Services Limited
- Argos (administrated by Domestic & General)
- Domestic & General’s own extended warranty cover (sold through their website)
- The majority of manufacturer extended warranties
AmTrust International Underwriters Limited
- Squaretrade cover sold direct from their website (only for iPads & iPhones in the UK)
- Squaretrade cover sold through Amazon
- Tesco (administrated by Squaretrade)
- Asda (administrated by Squaretrade)
- Hughes Direct (administrated by Squaretrade)
DSG Retail / Dixons Retail (trading as Currys & PC World)
- Currys – Under their “Know How” brand
- PC World - Under their “Know How” brand
Corporate Support Solutions
- Co-op electrical shop
- Sonic Direct
UK General Insurance
- Appliances Direct
- Direct TVs
- Laptops Direct
- Aircon Direct
- iView Cameras
Pinnacle Insurance plc
- Warranty Direct
Lloyd’s of London
- Warranty Direct
London General Insurance Company Limited
Richer Sounds manages their warranties in house.
Further information can be found in our article on extended warranty vs insurance – http://extendedwarrantycomparison.co.uk/extended-warranty-vs-insurance/