What is an insured warranty and why does it matter?
As an insurance broker, ALA only provide insurance based and backed warranty policies to our customers.
Not all warranties are insured – but if you buy a non-insured warranty what does it actually mean for you?
FCA (Financial Conduct Authority) – what standards must warranty companies meet?
| Insured Warranty | Non-Insured Warranty |
|---|---|
| The standards for any company selling an insured warranty are high - they must be authorised and regulated by the Financial Conduct Authority (FCA) in the same way as banks, finance companies and general insurers.
This means that the company and its employees must comply with FCA regulations. If these are not adhered to, the FCA will impose fines and possibly take legal action against the company and/or individual involved |
Whilst all companies must act in accordance with trading standards, for companies selling non-insured warranties there are no mandatory regulations that have to be complied with.
This means you would have no redress for poor selling standards, for example if the company mis-sold or mis-represented the policy in any way |
FOS (Financial Ombudsman Service) - who do you turn to if you want to make a complaint?
| Insured Warranty | Non-Insured Warranty |
|---|---|
| The FOS is an independent, public body set up by Parliament.
Essentially, if you’re unhappy with an insurer and haven’t had a satisfactory response using the company’s own complaints procedure the FOS are there to resolve the complaint in a fair, impartial way. Importantly, they have the ability to enforce their decisions, meaning if you’ve not been treated properly, they can tell the insurer how they need to rectify the situation. |
If the warranty is not insured, and you’re unhappy with the service or a settlement, your only option is to make a complaint to the warranty company itself.
If the company makes a decision that is not in your favour there’s nowhere to go and you’re most likely out of pocket – the independent Ombudsman is only available for insured warranties. |
FSCS (Financial Services Compensation Scheme) – what happens if your warranty company goes bust?
| Insured Warranty | Non-Insured Warranty |
|---|---|
| If your insurer goes out of business and can’t meet its liabilities under the policy, you can claim compensation through the FSCS – it’s as simple as that.
This means that with an insured warranty you have a form of redress from an impartial public body – you’re not reliant solely on the company itself where it may not even be able to help you. |
Essentially there is no independent external recourse if you have a non-insured warranty and the company fails.
This leaves you with no cover and no compensation. |
One other thing to bear in mind: as there is no underwriter for a non-insured warranty, there is a finite “money pot” to cover the cost of any claims. Once this runs out they can’t cover any further claims, potentially leaving you with a broken-down vehicle and having to cover the costs yourself AND no recourse or redress other than the company itself!
Overall it is a much safer option to opt for an insured warranty – with this you have the protection of the FCA, the Ombudsman and the Compensation Scheme, should you need it.
With a non-insured warranty you’re left at the mercy of the company themselves, with no independent remedy options if things go wrong.
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