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Smart Shopper Warranties Backed by a Risk Retention Group
68 messages, Last post on Sep 16, 2009 at 10:47 AM
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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.
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| 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. | |
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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. |
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| 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. | |
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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 |
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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. |
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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.
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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 |
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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. |
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