Vehicle Service Contracts

Vehicle Service Contracts are an important product for new and used automobile dealers, financial services firms and consumers. It is estimated that over 58,000,000 new and used vehicles will be sold in 2019 and most of these vehicles will be eligible for a Vehicle Service Contract. Over 16m Vehicle Service Contracts are estimated to have been sold in 2019 generating over $33b in gross retail revenue.

Vehicle Service Contracts are sold with a wide range of coverages, configurations and deductibles. Contracts are sold as wrap contracts to overlap a factory warranty, term contracts with a specific number of months or years, mileage contracts with a specific amount of miles and combinations of all types.

To become a licensed Vehicle Service Contract provider, also called an Obligor, a company will need to address many items including (and not limited to) the following:

REGISTRATION WITH MULTIPLE STATES
Many states have specific statutes that require anyone wishing to sell a service contract to register with the state prior to selling anything and meeting various requirements of the state for eligibility.

STATES THAT REQUIRE A FINANCIAL GUARANTEE
Many states have requirements for a provider to meet to ensure a provider is able to satisfy its obligations to the end consumer. These requirements may include:
- Obtain a Contractual Liability Insurance Policy or Service Contract Reimbursement Policy
- Establish Reserves, Post Bonds or other Security
- Parental Guarantee

UTILIZE AN APPROVED ADMINISTRATOR
Some states will require use of an approved administrator.

BACKGROUND CHECKS FOR OWNERS/DIRECTORS/MANAGEMENT
Some states will require background checks for officers and/or directors of the provider.

CREATE TERMS AND CONDITIONS WITH STATE VARIATIONS
Some states have specific language and conditions that must be included in service contracts. This may include refund terms and processing, cancellation terms, transferability, underwriter or financial guarantee and more.

FILE TERMS AND CONDITIONS
Some states require the filing with the state the Terms and Conditions.

These are just a few examples of the requirements to become a Vehicle Service Contract provider. Each state takes very seriously these requirements and go after companies that fail to comply. Generally, companies that wish to market Vehicle Service Contracts have two options:

1) Build an In-House Service Contract Provider
2) Utilize an existing Third Party Provider

Personal Safeguards Group, LLC ("PSG") works with clients to determine the most appropriate option through its network of professional legal and compliance advisors, third party obligors, highly rated insurance carriers and administrators.

PSG works with Automotive Dealers, Financial Services Firms, Direct Marketers, Administrators, Agents and Brokers and develops:
SERVICE CONTRACT PROGRAMS
Automobile, RV, ATV, Marine

ANCILLARY AUTOMOTIVE PROGRAMS
VIN-Etch, Appearance Protection, Tire and Wheel, Key Fob, Dent, Windshield and other similar products

LIMITED WARRANTY AND CERTIFIED PRE OWNED (CPO) PROGRAMS
Automobile, RV, ATV, Marine

GAP PROGRAMS
Automobile

PSG assists its clients in building end to end structures and include Reinsured Programs, Direct Programs and Profit Sharing Programs.