Why Most Warranty Products Fail and How to Build One That Lasts
Most warranty products fail because they are built on flawed pricing and drained funds. Here’s how a fair, discretionary model creates sustainable cover that actually pays claims.
James Purcell
Managing Director
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The warranty industry has a structural problem.
Too many claims are rejected, not because customers are dishonest, but because warranties are priced inaccurately from the start. The result is predictable: insufficient funds, aggressive exclusions, and frustrated customers.
This is not a service issue. It is a product design issue.
The Core Problem With Traditional Warranty Models
Most insurance-backed warranty products follow the same flawed pattern.
Pricing is set too low to win sales, leaving little money for claims
Large portions of revenue are removed as admin or insurance costs
By the time claims arise, the fund is already under pressure
When policies end, any remaining money disappears. It does not protect future customers. It does not improve the product. It simply leaves the system.
This model encourages short-term thinking and increases the likelihood of rejected claims.
A Discretionary Model Built to Pay Out
At Love Warranty, we take a different approach.
We use discretionary warranties that are fair, compliant, and designed around sustainability rather than volume. The structure is simple and transparent.
Dealers take a fixed, agreed profit
We take a small admin fee
Up to 80% of the money stays in the fund for claims
This means the fund is built to do what it exists for: pay claims when customers need support.
What Happens When Claims Are Low
One of the biggest differences in our model is what happens when claims are not made.
The money does not disappear.
It remains in the fund to protect future customers, strengthen the programme, and maintain stability over time. This creates a long-term incentive to price correctly, manage claims fairly, and avoid short-term behaviour that damages trust.
Data-Driven Pricing and Accountability
We track every part of the warranty lifecycle:
Warranties registered
Claims paid
Average repair costs
Claim frequency and trends
This data keeps pricing accurate and sustainable. It also allows adjustments to be made before problems appear, not after customers are affected.
This is how warranty products should be managed.
Regulation Is Catching Up
The FCA is watching the warranty sector closely.
Poorly structured products, unclear terms, and unfair outcomes are already under scrutiny. The gap insurance market shows what happens when products fail to deliver fair value. Bans follow.
Warranty products that are not transparent, sustainable, and customer-focused will face the same pressure.
Our products are built with this reality in mind.
Proven Results, Not Promises
Our model is not theoretical.
It is tried, tested, and backed by real-world data from thousands of warranties and hundreds of claims. The result is a 98.7% claims payout rate.
Valid claims get paid. The system holds up. And dealers are not left dealing with fallout.
A Better Future for Warranties
Warranties do not need tighter exclusions or cleverer wording.
They need:
Fair profits
Real cover
Sustainable pricing
Transparent structures
That is how you protect customers, support dealers, and build products that last.
If you want to build a warranty programme designed for the long term, we should talk.
Register your interest to learn more.
