Last week’s BBC Watchdog looked at the subject of extended warranties. I have written previously about the poor value for money that extended warranties offer most people. We first began to look at these products when our customers told us about their dissatisfaction with them. Typically, the exclusions to the policy weren’t made clear by in-store sales staff at the time the warranty was being sold. Customers were left to fix any problems themselves when the policy underwriters used these exclusions to get out of honouring the policy.
It seems that the Watchdog team have received enough similar complaints about electrical store Comet and its Extra Care extended warranty. They decided to investigate and sent out their team of mystery shoppers. In the majority of the 15 stores that they visited, staff told them they would be covered for things that the warranty specifically excluded. They found that in every Comet store they visited staff gave false, misleading or insufficient information. You can watch the piece on the BBC Website at:
Whilst this is shocking, it still comes as no surprise. We published an extensive report into the extended warranty market in February 2011: The Billion Pound Waste of Money. That found that these policies simply don’t offer very good value for money and that’s why consumer organisations like Which? and ConsumerDirect have urged people to say no.
But if that’s the case, why do so many of us opt for such a policy when buying electrical appliances? The answer is the obvious one: these products are highly profitable for the retailers, with margins usually much higher than on the appliances themselves. Sales staff at retailers are often set targets and incentivised to sell extended warranties. The Watchdog piece highlighted a Comet internal document that laid down the target for sales staff of two Extra Care policies per shift.
In our consumer research, we found that 48% of the people we spoke to said they’d felt pressured into buying an extended warranty. This is hardly suprising when sales staff are themselves put under pressure to sell them.
We again call on the Office of Fair Trading to investigate this market and make retailers ensure that their sales staff accurately explain the policy exclusions. The retailers should also be made to publish more data about the real value of extended warranties.