RiskTech Forum

SAS: Detecting Claim Fraud and Improving Product Quality Case studies in reducing warranty costs

Posted: 26 May 2010  |  Source: SAS

Globally, manufacturers spend more than $70 billion to cover warranty expenses each year (Warranty Week, 2009). That’s more than 2 percent of revenue for most companies, but that is only the beginning. The impact of indirect costs, such as increased government scrutiny, tarnished brand image, reduced stock prices and lost sales, can quickly dwarf the direct costs. The billions lost by companies such as Toyota, Firestone and Ford clearly manifest this impact.

In good economic times, these costs are significant; in times of economic slowdown, they can be devastating. With margins tightening and sales dropping, the impact of warranty claims is even greater. Warranties for products that were sold months or years ago are compared to the declining sales of today. Even if your failure rates stay consistent, your cost as a percent of sales (the only metric stockholders see) gets worse and worse. Fraudulent service/warranty claims can make the matters worse. Tough economic times have forced service providers to desperately seek new sources of revenue. Service providers that were always thought to be trustworthy are now trying to slip things through the system, and the ones that were already considered crooked are getting more and more sophisticated.

To reduce claim costs and increase customer satisfaction, forward-thinking manufacturers are applying automated analytics across the warranty chain. Detecting and preventing fraud, finding emerging quality problems sooner and accelerating the problem-solving process can reduce warranty costs by more than 20 percent while keeping customers happier than ever. Applying these analytics doesn’t take a PhD. The power of sophisticated analytics can be surfaced in an interface that is appropriate for your auditors, analysts and engineers. By building warranty business knowledge into the system and automating much of the work, problem solvers can do what they’re meant to do – solve problems.

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