Abuse and Fraud: Divisive Issues?

Service abuse and warranty fraud (hereafter referred to simply as “warranty fraud”) has been a hot topic in our CompTIA services communities as well as within the industry at large over the past year. And well it should be; recent research by PwC estimates that the cost to the industry is between 3 to 5 percent of revenue. We have all been touched in one way or another by warranty fraud. It’s a pervasive industry problem that, much like shoplifting, can inflate the cost of goods and services to businesses. Unlike shoplifting, warranty fraud is an extremely broad term that applies all the way from well-meaning (but incorrect) consumers who unintentionally submit fraudulent claims, to criminal organizations that systematically exploit procedural weaknesses within large manufacturers’ programs. Yet, despite all the stories and industry awareness, many OEMs cannot accurately quantify their warranty fraud and service abuse exposure.

It’s common knowledge that resellers continue to experience margin pressure from their vendor partners. This force has primarily driven resellers into higher value-add lines of business such as traditional services, managed services and cloud computing. In this increasingly competitive marketplace, it’s natural for resellers to see warranty fraud primarily as an OEM concern and view efforts to reduce it suspiciously, leading to further encroachment on their business. But the truth is that warranty fraud affects every company in the industry.  As I mentioned previously, in much the same manner that shoplifting results in inflated prices, warranty fraud has the same potential effect to raise prices to offset the associated losses. Additionally, warranty fraud creates an unfair playing field between the overwhelming majority of resellers who abide by vendor warranty processes and those who skirt the rules to increase profits. Finally, a poor understanding of warranty claim processes and acceptable practices can inadvertently put a reseller in this category. The bottom line is that it’s clearly in everyone’s best interest to take the steps to reduce warranty fraud to lower costs and mitigate legal risks.

So how can we best address this issue? When the industry identifies a problem and engages in discussion, it can develop creative and innovative solutions to global problems such as warranty fraud. The role of CompTIA, as your IT industry association, is to facilitate this process with its members (manufacturers, distributors and resellers), partners (other industry associations with a vested interest in this topic) and other stakeholders for the benefit of all. To this end, CompTIA will be hosting workshops over the next year to discuss this concern, identify root causes for the issues, and plan solutions to this problem. While it is still too early to describe the best solution, it will likely include a combination of industry awareness and recommended service delivery best practices. 

We’d really like to hear your thoughts and ideas. Is warranty fraud even on your radar at this point in time or are there more important issues we need to tackle first We’d like to find solutions that are a win-win-win for manufacturers, resellers and consumers alike.  Please post a comment below, or reach out to me directly at [email protected] to get further involved in this discussion and initiative.