Extended Warranty Premium Pricing Methods For Brown (Electronics) And White (Appliances)Extended Warranty Premium Pricing Methods For Brown (Electronics) And White (Appliances)
The 3 basic methods that most Brown & White warranty systems supported is Price Zone, Product Category, and % Based Premium. I will not be going into the details of how the actual premium amount or premium % is derived, instead state that they are based on actuarial analysis of actual claims, premium and underwriting experience.
Price Zone matches the amount paid for any product to a price zone from amount and to amount to get the warranty premium. This is very simple to setup and maintain on a warranty system. This method is very basic but allows you to sell warranties on any products. This method does not allow you to have a higher premium on certain products that might have a higher risk, break more often, or cost more to repair.
Example :
Consumer purchases 48” LED 4K TV for $ 350.00 and then purchases a 24 month
extended warranty. Based on the table below the warranty premium for the consumer is $ 30.00
Extended Warranty Price Zone Warranty Premium
24 month $ 10 – 50 $ 5.0024 month $ 51 – 100 $ 15.00
24 month $ 100 – 500 $ 30.00
48 month $ 10 – 50 $ 8.00
48month $ 51 – 100 $ 19.00
48 month $ 100 – 500 $ 26.00
Product Category matches the product purchased to a product category to get the warranty premium. This is more complex to setup and maintain on a warranty system. This method allows you to sell warranties on any product as long as you maintain the product category table and get a product category for each product a warranty was purchased for. This method takes a lot of time to setup and maintain since every products has to be tied to a product category. This method allows you to have a higher premium on certain product categories that might have a higher risk, break more often, or cost more to repair.
Example : Consumer purchases 60” LED 4K TV for $ 450.00 and then purchases a 24 month
extended warranty. Based on the table blew the warranty premium for the consumer is $ 30.00
Extended Warranty Product Category Warranty Premium
24 month 12” - 24” LED 4K TV $ 5.00
24 month 25” - 48” LED 4K TV $ 15.00
24 month 49” - 60” LED 4K TV $ 30.00
48 month 12” - 24” LED 4K TV $ 8.00
48month 25” - 48” LED 4K TV $ 19.00
48 month 49” - 60” LED 4K TV $ 26.00
% Based Premium takes the product purchase price and multiplied by a % to get the warranty premium. This method is very basic but allows you to sell warranties on any products. This method does not allow you to have a higher premium on certain products that might have a higher risk, break more often, or cost more to repair.
Example :
Consumer purchases 60” LED 4K TV for $ 450.00 and then purchases a 36 month
extended warranty. Based on the table blew the warranty premium cost for the consumer is $
31.50 (450 * .07). This method is very simple to setup and maintain on a warranty system.
Extended Warranty Warranty Premium %
24 month 5 %
36 month 7 %
48 month 10 %