Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!





Warranties Backed by a Risk Retention Group

On June 10, 2003 I wrote in the "Warranty Gold" Claims discussion how the failure of National Warranty Risk Retention Group would affect the Warranty Gold customers (message #639 and #642). At that time respondents thought my logic was flawed. As it turns out I was correct.

Now I am writing to you about 2 other warranty companies that are backed by Risk Retention Groups. As we have learned from the Warranty Gold/National Warranty RRG debacle the damage to the consumer is immense. What we don't need are more people to be victmiized as the Warranty Gold/National Warranty customers were.

1. Interstate National Dealer Services (INDS) - A.M. Best issued a press release on December 23rd downgrading National Service Contract RRG from A- (excellent) to B++ (very good)with the rating still under review with negative implications. In case you don't know National Service Contract, RRG is majority owned by Interstate National Dealer Services (INDS). I can remember all too well how quickly National Warranty fell from grace as soon as AM Best dowgraded them.

2. First Automotive Service Corp - aka First Automotive Insurance RRG. On January 12, 2004 the Texas Department of Licensing and Regulation issued a press release on the following:

"The Texas Department of Licensing and Regulation (TDLR) has obtained a permanent injunction ordering a New Mexico service contract provider to stop offering or selling extended warranties for automobiles in Texas for which it lacks proof of adequate financial security.

Judge Suzanne Covington of the 201st District Court in Austin Monday ordered First Automotive Service Corp. (FASC) of Albuquerque to stop providing, offering, advertising, selling or marketing service contracts unless it can show that the policies will be properly backed".

If you remember First Automotive Service Corp is the new administrator for Warranty Gold!!

I only hope and pray that these two companies don't continue to slide like National Warranty did. What we don't need is more consumers facing the same problems we all did since the National Warranty failure.
«134

Comments

  • mitzijmitzij Posts: 612
    Hopefully, consumers will find out about WG and other companies that leave people holding the bag BEFORE they buy service contracts. An 'extended warranty' for your vehicle is a money-making project for these companies. The vast majority of people won't see a return on their money, even if the company stays in business. The cheap service contracts are cheap because they don't pay for many claims. The expensive ones cost more because car repair can be expensive. For a service contract, you're basically pre-paying for repairs. It's a risky venture to give someone your money with the promise that they will pay for repairs you might need someday in the future.
  • driftracerdriftracer Posts: 2,692
    and it'll probably be moved, but in any case, aftermarket "warranties" are profit oriented for the dealer and underwriter, and a loser deal for many consumers.

    If you're going to buy a contract, get a real warranty from the manufacturer, or just save your money.
  • most of all the online warranty companies now use the risk retention groups(RRG), it is a way that they can get around paying claims. RRG's are small companies that aren't worth anything, they don't fall under any scrutiny, they don't meet any regualtions and thats plainly enough the consumer gets trampled on. AVOID COMPANIES LIKE WARRANTY GOLD, WARRANTYBYNET, these companies are famous for giving the customer the old screw. Keep your money chances are you may or may not need it, it is a calculated risk just as anything other type of insurance. But let me leave you with this, if the GOLDs and BYNETs, were that good they wouldn't be paying for advertising all over the net, (word of mouth is the best advertising), and message boards would not have people writing about the bad experiences with them.
  • Can you post where you found the info on INDS and the fact that their review is still open and that they own NSC? I called Interstate today and they said that their review is closed. They also said that they are the only RRG rated by A.M. Best. They said the B++ rating was a result of A.M. Best nervousness over the Warranty Gold fiasco. Not sticking up for anyone...just want the facts laid out and backed up.

    xpfshost
  • mitzijmitzij Posts: 612
    Under 'news', AM Best company number 11820. Lists a press release dated 12/23/03, Oldwick, NJ. Might be just nervousness, but I'd be nervous, too.
    I think www.ambest.com will get you there.
  • Sounds like Interstate is not telling the whole truth too you xpfshost! The AM Best article dated December 23rd states why they downgraded the RRG as well why it still is under negative implications and I quote:

    "NSC's rating historically had been supported by the strong capital position of INDS. However, to fund the buy-out of INDS'existing shareholders, its retained earnings were liquidated and management invoked bank debt. At the conclusion of INDS' privatization in January 2003, the strong capital cushion between INDS and NSC was removed. The reduction in capital and addition of bank debt significantly increased INDS' leverage."

    So as you can see AM Best didn't downgrade National Service Contract RRG because of nervousness of Warranty Gold. It did based on the action that Interstate took when they bought out their shareholders and invoked bank debt.

    "AM Best remains concerned that NSC's capitalization may no longer support its current rating should INDS' LRF (Loss Reserve Fund) develop advsersely. This concern is due to the fact that under its reinsurance agreement with INDS, NSC is subject to all of the potential adverse reserve development of INDS' LRF."

    Just thought you liked to know.
  • Thanks. I tried getting the article before, but the navigation on the site was confusing and it looked like I might have to pay for it (which wasn't the case). Also, I couldn't read it because you have to register first, which I eventually did. It's easier to question INDS when you have the information right in front of you. Thanks again.

    xpfshost
  • jennyk4jennyk4 Posts: 38
    News Release

    For Immediate Release Contact: Patrick Shaughnessy
    DATE: January 12, 2004 512-463-3208

    TDLR INJUNCTION HALTS SALE OF UNSECURED VEHICLE WARRANTIES
    Company Must Provide Financial Assurance Before Selling New Policies

    AUSTIN - The Texas Department of Licensing and Regulation (TDLR) has obtained a permanent injunction ordering a New Mexico service contract provider to stop offering or selling extended warranties for automobiles in Texas for which it lacks proof of adequate financial security.

    Judge Suzanne Covington of the 201st District Court in Austin Monday ordered First Automotive Service Corp. (FASC) of Albuquerque to stop providing, offering, advertising, selling or marketing service contracts unless it can show that the policies will be properly backed.

    FASC did not contest the injunction. It was entered as an agreed final judgment.

    Under the Texas Service Contract Regulatory Act, companies in Texas that provide service contracts are required to prove before they sell policies that they have sufficient funding to service the contracts they sell and they must maintain adequate security during the terms of those contracts. This can be done through the purchase of reimbursement insurance from a third party.

    While investigating Warranty Gold, a licensed service contract provider that declared bankruptcy November 11, 2003, TDLR discovered that policies sold by Warranty Gold since June 2003 named FASC, rather than Warranty Gold, as the company that would actually provide the warranty coverage. FASC, in turn, stated in the policies that reimbursement insurance to cover claims was provided by Dealers Assurance Corp. (DAC) of Columbus, Ohio.

    However, DAC has informed TDLR that it never agreed to provide reimbursement insurance and never provided financial backing for the policies.

    The injunction prevents FASC from offering or selling any policies that are purportedly backed by DAC. The order does not affect FASC’s ability to sell policies properly secured by other insurers.

    Created in 1909 as the Bureau of Labor Statistics, TDLR protects the public welfare and safety and promotes a fair and competitive business environment by regulating twenty diverse industries and programs, including service contract providers, boxing, air conditioning contractors and architectural barriers.
  • RRG's are not backed up or regulated like real insurance companies. A service contract "insured" by an RRG can become worthless a split-second after you purchase it. (That was a $1200.00 lesson for me)Always read the fine print!
  • http://www.journalstar.com/warranty.php?story_id=116536

    Warranty Direct
    Warrantybynet
    1Source
    Warrantywarehouse

    These are just a few of the companies backed by Risk Retention Groups. Notice in the article it speaks of several RRG's that are insolvent. The author says National Warranty Insurance was insolvent back in 2001. Be careful!
  • Warranty Direct administered and owned by Interstate National Dealers Service and backed by National Service Contract Insurance Risk Retention Group...Rated B++ with the rating still under review with negative implications!!!

    Warrantybynet administered and backed by Heritage Warranty Mutual Insurance Risk Retention Group...Rated NR-1 (Insufficient Data)!!!!

    1SourceAutoWarranty.com administered by 1Source and backed by PrimeGuard Insurance Company, Inc RRG...Rated NR-1 (Insufficient Data)!!!!

    Warrantywarehouse.com is backed by a Risk Retention Group but I am not sure who it is yet. But I will find out soon and let you all know!!

    I will continue to bring more information on these companies when I get it so that no one else will have to go through what myself and thousands of others did when NWIG collapsed....Stay tuned!!
  • Keep us posted! I was burnt by WG and decided to go with WarrantyDirect...but after the info in this thread, I've toasted that policy and am awaiting a refund. Thanks for the good info to all here.

    xpfshost
  • angelloveangellove Posts: 14
    I finally got who their insurer thanks to another post. The administrator is American Guardian Warranty who is backed by....you ready for this??? St. Charles Insurance Company Risk Retention Group!!! Guess, what they are rated....NR-1 (Insufficient Data)!!!

    I will keep you all informed as I find out more information. It seems my goal in life has become not to let anyone else get hurt by the Warranty Gold type companies like I did.
  • xpfshostxpfshost Posts: 35
    OK, so I sent in a request to cancel my contract and issue me a pro-rated refund from Warranty Direct (from contract date and contract mileage, BTW). I've only had the contract a few months and have driven about 1K miles (I don't drive much) and have paid out $550 so far. My refund was $89. Now you have to excuse me whilst I whip out my heavy artillery...to be continued...

    xpfshost
  • angelloveangellove Posts: 14
    You know it is interesting to see that after all that has been said in this post and others about companies that are insured by a risk retention group that Edmunds continues to have a partnership with Warranty Direct!!! A company that is backed by a Risk Retention Group and is rated B++ by AM Best with negative implications. Perhaps that needs to change?
  • mikefm58mikefm58 Posts: 2,882
    < Perhaps that needs to change? >

    I'll hold my breath. As long as the all-mighty dollar is involved, there will always be sham companies like WG and others backed by RRG's. I've learned a valuable lesson by my WG experience: any warranty is only as good as the company behind it.
    .
    Oh, I almost forgot, I also got burned by an extended warranty on a computer purchase in 1998. I bought a desktop from Computer City (since bought out by CompUSA). At the time I purchased their 3-yr. on-site service plan for $189. When CompUSA bought Computer City one year after my purchase, they sold the service plans to another party. My modem crapped out, so I tried calling for service and was on hold for hours and hours on several different days. I'm sure there was no one there. I realized that a 3-yr on-site service plan CANNOT be profitable for $189. One call will eat all of the $189 up, so no more on-site policies for me. I do purchase the computer manufacturer's warranty that gives me email or phone support for 3 yrs. as I know a little bit about computers.
    .
    Sorry to go off on a tangent here, but just posting my experience with warranties in general.
  • mitzijmitzij Posts: 612
    Yeah, my b-in-law talked me into buying an extended 'warranty' on a cd player back in '94. It was only $50, but I never needed it. The player still works great. It still bugs me that I forked out extra money for no good reason. I chalk it up to youth (20) and inexperience.
  • xpfshostxpfshost Posts: 35
    OK. Finally got someone to 're-calculate' my refund after faxing info back over to them last week. NOW they say that they're sending me another $233. Can't those people add??? I'm still out about $233. $99 of that was money I had to pay to a vehicle inspection company to come out to certify my car before the warranty could take place. $50 went to a processing fee because I cancelled my policy early. Unfortunately, they hit me with the fact that the policy starts at -0- miles, so even though I've only driven about 1K since the warranty started, I've actually (in their minds) used over 30% of my warranty since my car has 35K on it and the warranty goes up to 100K. Nice. At least I got something back. I'm still not happy I had to have them 're-calculate' the refund...

    xpfshost.
  • blueiedgodblueiedgod Posts: 2,803
    Qoute by mikefm58: "I do purchase the computer manufacturer's warranty that gives me email or phone support for 3 yrs. as I know a little bit about computers"

    What I have learnt over the years, especially with computers, that they depriciate faster than cow dung cools. The modem that failed on your computer was probably still covered by its manufacturer's warranty. Besides, even the most expensive, hardware type modem, is about $80. I am pretty sure that a store built computer had a cheapo sub-$10 winmodem.

    I am always sceptical about warranties other than manufacturer's, be it cars, computers, electronics, other merchandise. In order for those companies to stay in business and pay the executives million dollar slaries, they have to be profitable, if they fulfill every claim they will not be profitable and will not be able to afford million dollar salaries.

    Most warrnaties have exclusions that no one bothers to read. Even manufacturer's warranties exclude many things. Chances of something major, like engine or tranny failing after basic warranty are slim if the component has not failed this long. Good routine maintenance will make the car run indefinateley, some parts will require periodict replacement, but these are the parts that are not covered by the warranty.

    Generally, I would say stay away from extended warranties, put that money in the high yeld savings (ING direct or E-trade) or 3 year CD, and then see if you end up on top after 5 years.
  • mikefm58mikefm58 Posts: 2,882
    <The modem that failed on your computer was probably still covered by its manufacturer's warranty. Besides, even the most expensive, hardware type modem, is about $80. I am pretty sure that a store built computer had a cheapo sub-$10 winmodem.>
    .
    At the time (1999), I was ready to switch to Road Runner but I thought it was a good idea to test my warranty. Glad I did before something broke and I needed it, not sure what modems were going for back then. I never did fix/replace the modem.
    .
    My thoughts exactly on extended warranties in general. If I do consider one, it's only with the original manufacturer (that is after my WG lesson). And I read the fine print first to see if they sell it to a 3rd party.
«134
This discussion has been closed.