Study Tackles How Service Providers and OEMs Deal with Warranty Fraud

Alliance for Grey Market and Counterfeit Abatement (AGMA) and CompTIA release a new whitepaper detailing the results of a two-year study on warranty and service abuse in the IT industry. Several best practices that vendors can adopt to thwart warranty fraud by channel partners, as well as market research on warranty issues, are described in the whitepaper.

The findings of the study are derived from survey data gathered from an estimated 400 service providers and 15 original equipment manufacturers (OEMs), as well as group workshops and interviews with industry thought-leaders.

AGMA reported that in 2009, the cost of warranty abuse – or the usage of services or warranty by certain customers or recipients who are not entitled to them—was three to five percent of vendor revenues. Taking advantage of RMA non-returns, over-usage of services, and nonexistent service charges are some of the typical cases of warranty and service abuse, according to AGMA.

“Systems for dealing with warranty abuse are evolving quickly, as the industry switches from being reactive, after the fact, to proactive,” said Aaron Woods, a CompTIA board member and Xerox Corp. director. “There is increased collaboration between service providers and OEMs on creating robust management systems that confirm legitimate warranty claims without placing undue burdens on the service provider.”

Among the best practices put forward by the AGMA/CompTIA paper to aid OEMs and solution providers in minimizing instances of warranty fraud include the following. One, implement well-defined end-user rules and enable parts identification through OEM controls. Two, hire internal warranty claim administrators tasked to keep an eye on end-user and technician part usage and procedures. And three, use standard file formats that enable service providers and OEMs to communicate in “real time” throughout the warranty process.

The AGMA/CompTIA whitepaper also says that the industry should come up with standards defining the most commonly used and pertinent data elements for validating a warranty, verifying technician certification, identifying repair event milestones and exceptions, and handling errors.

AGMA board member and Hewlett-Packard director Angela Narvaez said, “Fraud prevention is really an ongoing process. We want to shift the paradigm from investigating events after the fact to preventing the fraud before it happens. Once certain abuses or over-ordering occurs, you can never fully recover the loss.” (KOM) Link. Link.