A dealership employee trying to perform in-house warranty claims processing, but failing. A dealership employee trying to perform in-house warranty claims processing, but failing.

Warranty Claims Processing & Why It Should Be Outsourced

Warranty claims processing continues to plague automotive dealers with high administration expenses, managerial distractions, employment issues, and staggering losses. Many have asked, “Why does this seemingly straightforward administrative task continue to create such painful and costly distractions?” 

The answer lies in how warranty is intertwined with service and how its result is a product of service policies, operations, and procedures.  Significant revenue, the complexity of methods, the expiration of payments, the rigidness of interfaces, factory-required documentation, and its association with a customer-driven highly technical profit center make warranty claims processing a system likely to fail. 

Most dealerships are only an employee change away from a collapse in their warranty claims processing system with costly implications. Interested in reading more on the benefits of outsourcing? Check out our guide to automotive warranty claims processing!

Gears turning that simulates the intricacies of warranty claims processing.

Warranty Claims Processing as a Major Revenue Source

Depending on the make and location of the dealership, warranty claims processing can contribute to as much as 60% of gross service sales. With a standard mix of 30% – 40%, it stands as the service department’s largest single source of revenue.

Even when the systems are intact and operating as expected, minor claim losses can accumulate to thousands of dollars. Also, liabilities may go unnoticed.

The Complexity of Claims Processing

Gone are the days when manuals were regularly printed.

Several years ago, manufacturers would annually ship updates to their warranty policy manuals or policy procedures manuals. The size of these publications represents just the tip of the iceberg when it comes to the complexity of warranties.

These manuals didn’t cover the procedures to enter a warranty claim, rectify a rejection, or file an appeal. Additionally, they omitted the numerous variations tied to technical service bulletins, the latest restricted procedures, and the most recent special service announcements.

The scenario is further complicated by the intricacies of body shop claims, transportation claims, and extended care warranty claims. Often, submissions necessitate a blend of repair procedure knowledge and a dose of good old-fashioned common sense. Outsourcing your claims would prove to be very beneficial for your dealership.

The Expiration of Payments

Valuable items typically have varying degrees of worth; it’s uncommon for possessions to depreciate from being valuable to worthless in just a few days. However, this is exactly the scenario with warranty claims processing.

Each manufacturer adheres to its own set of rules regarding the duration for which a warranty claim will be honored, and these rules can also vary due to state laws. In some instances, there are measures available to recover expired claims, but such processes are seldom outlined in any manufacturer’s publications. Often, this involves calling in favors, and with some luck, this effort might result in partial payment.

The reality remains that every year, tens of millions of dollars in warranty claims expire and remain uncollected.

The Rigidness of Interfaces

With an average of 30,000 parts in a new vehicle and multiple types of warranty coverages, the range of repair possibilities is vast.

The most any automated system can achieve is to address the most common repairs and concerns. To accommodate such diversity, the systems and the codes they rely on are not fully capable of providing accurate responses to all issues. For instance, a simple error in code or date could trigger entirely inaccurate rejections from the automated system. Effective warranty claims processing hinges on the warranty administrator’s experience and understanding of these systems and their limitations.

Regrettably, acquiring this knowledge is only possible with proper training, aptitude, time, and a high volume of submissions.

Required Documentation

For anyone genuinely prioritizing customer service, frequent interruptions to address customer concerns can be taxing, especially when facing what seems like needless bureaucracy.

However, shifting one’s perspective to understand warranty claims processing from the manufacturer’s standpoint reveals the substantial risks they assume. Essentially, every dealership has the capacity to draw funds directly from the factory’s account.

To guard against potential fraud and misuse, manufacturers mandate that certain protocols be observed. It’s essential to realize that the manufacturer’s risk isn’t just with the dealership but extends to every service employee who can draft a repair order, allocate labor, or bill apart. The majority of factory stipulations aim to ensure that management is diligently overseeing and regulating expenses claimed by their staff.

Navigating Common Hurdles in Warranty Claims Processing

A dealership employee attempting to navigate common warranty claims processing hurdles.

Warranty claims processing is not the driving force of the service department but rather the caboose. During regular daily operations, when discrepancies arise, uncollected revenues can move towards the end of the line, culminating in the final stop—The Warranty Schedule. Below is a list of factors that often lead to concerns in warranty claims processing:

  1. Management Turnover
  2. Poor RO Documentation
  3. Improper Dispatching
  4. Advisor Turnover
  5. Congestion in the Service Lane
  6. Ineffective Customer Communication
  7. Technicians Mis-coding Labor*
  8. Absence of Warranty Administrator*
  9. Unsound Accounting Practices*
  10. Inadequate Parts Return Policies
  11. Errors by Inexperienced Warranty Administrators*
  12. Subpar PDI Reception Processes

Given the significant revenue involved, coupled with the complexity, need for timeliness, rigidity, liability, and dependency on various individual processes, warranty claims processing might just be the system most prone to failure within your organization. Hiring the right warranty claims processing company can alleviate some of these concerns. Engaging TBF/Jupiter to manage your warranty claims processing can address as many as four issues (as indicated above*) and provide third-party insight and guidance on several of the remaining factors. Don’t risk your hard-earned revenue; allow us to help you mitigate your risks and establish a robust system capable of handling the most challenging situations. Contact Us today.

Jupiter Warranty Management is a leading company in automotive warranty processing. Based in the USA, we work with hundreds of dealerships and handle warranties for over 33 car brands. We have developed a system that makes the warranty process easy and straightforward for dealers. One of our standout services includes protecting dealers from financial setbacks like unexpected write-offs or chargebacks from manufacturers. As the automotive world changes, we continually adapt to meet these new challenges. When it comes to warranty services, Jupiter Warranty Management is a top choice for dealers looking for reliability and expertise.