Discretionary vs Insured Warranty Plans
Written By Duncan McClure Fisher
MotorEasy Founder & CEO
If you’ve come to this page while researching car warranty protection, you’re doing your research and have come across this distinction between the different providers out there.
Insured warranty schemes are agreements that the insurance company, in conjunction with an underwriter, will indemnify the policyholder against loss caused by a covered part in specific circumstances.
Discretionary (sometimes referred to as “non-insured”) warranty schemes are agreements that rely on the supplier using their discretion to help consumers resolve problems - and are not as limited in their terms and conditions. They involve setting aside a warranty fund to compensate motorists against losses caused by covered parts.
I have worked using both models and there are pros and cons to each. In nearly 20 years managing Warranty Direct (where we were one of the key drivers of growth in direct to consumer insured warranty schemes) it’s something which was often debated among colleagues. But I believe consumers'expectations have moved on, and so warranty protection needs to. The member benefits now offered by discretionary warranties are too significant to ignore. I’m so confident of this, that when we founded MotorEasy and wanted to build a new, better level of warranty cover, we made it discretionary.
I want to explain why we decided to go down this route, and why we believe it offers the best outcome for all warranty plan members.
A key part of running a successful warranty scheme is building comprehensive cover at an attractive price - to do so you need to prevent pre-existing fraudulent repairs. Unchecked, these over-inflate warranty pricing. So, effective repair fund management is in the interests of all members. It’s why we go to great lengths at the inception of each warranty to ensure cars are eligible for cover, with no pre-existing issues. We require up-to-date MOT, tax and servicing, as well as arranging a health check before accepting cars on cover.
We also offer members some of the UK’s best rates for car maintenance, with main dealer levels of MOT and servicing at a fraction of the usual cost.
Inspections & Health Checks
Like any warranty provider, we cannot cover pre-existing faults. Sometimes, pre-existing faults are obvious, but as a further check, we carry out inspections before accepting cars on cover. We can then manage any repairs for faults identified during this booking at considerably reduced prices and then they will be covered by the warranty. The result to you as a member = Less fraudulent repairs, meaning lower warranty pricing without reducing cover levels.
Cheaper Warranty Protection
As a VAT registered service & maintenance plan, discretionary warranties allow providers to reclaim 20% of the cost of fulfilling service and maintenance warranty plans for members. Compare this with the insured operating model where providers are forced to pay a hefty commission (usually 15-20%) to underwriters for fund management. In addition to this, fees are subject to IPT (12%) which cannot be reclaimed - the only way to recoup this cost is increased pricing or reduced cover for members.
In reality, members are not affected by this distinction as long as the company puts in place measures to safeguard the warranty fund and protect it’s members against fraudulent repairs. In short, discretionary warranty plan members pay less for better cover - traditional plans struggle to compete under the increased costs described above.
Repair Decision Speed
Insured warranty providers can make some repair decisions immediately, but significant repairs need to be authorised by underwriters before repair funds are released. This can take days or even weeks, during which time you’re without a car. Speaking from personal experience, there are even circumstances where a warranty provider wants to complete a repair but the underwriter refuses to release the necessary funds to do so, leaving their hands tied. Discretionary warranty providers are able to authorise repairs in-house, even for the most expensive repairs, meaning you’ll get back on the road faster.
Insured Vs Discretional Warranty Cover
Insured warranties are limited by restrictions applied to insurance. They operate in black and white terms when it comes to warranty repairs. Failures are either clearly covered, or not, with no leeway or grey area. Even where the differences between two components might seem incredibly similar, one can be covered where the other will not.
The reason for this is “precedence”. If a provider decided to cover a component as a goodwill gesture, they could be forced to do this for every claim instance, even going back to historic claims. As a consumer, this means you’ll see warranty costs increase.
Like insured warranties, discretionary cover must follow the terms of the service and maintenance warranty plan. Unlike insured warranties however, discretionary warranties are able to extend coverage to incorporate some of the “grey area” repairs mentioned above. What does this mean for you? More components covered.
Valid warranty repairs are always covered, for both insured & discretionary companies. Providers cannot reject a valid warranty repair in either case.
In both cases, any disputes are referred to independent regulatory bodies - the FCA for insured warranties or the Trading Standards approved Motor Ombudsman for registered discretionary providers - of which MotorEasy is one.
The Motor Ombudsman
The UK’s government backed, independent regulatory body for the motor industry. They’ve created Chartered Trading Standards Institute (CTSI) backed Codes of Practice for car warranties, to which all MotorEasy warranties subscribe. The purpose of these is to drive high standards of work, and provide consumers with added peace of mind, protection and trust. At MotorEasy we want to be open, honest and clear in our sales, advertising and repairs processes - The Motor Ombudsman helps us achieve these.
Security & Experience
Discretionary plans are sometimes termed “non-insured” - which can sound alarming - but in reality both models work in a similar manner, the distinction is in where the claims fund is managed. For more than two decades, I worked with some of the most prestigious Lloyd's of London syndicates, and even spent my formative years working at Lloyd's. A warranty provider, managed correctly, will complete this task with no difference to the end consumer.
MotorEasy was founded by a team of motoring experts with particular experience in repairs, maintenance and car ownership. My experience in car warranty protection dates back to 1997, and since then I have provided warranty protection to more than 500,000 UK motorists.
Manufacturer Warranty Protection
Discretionary warranties may be trending in the direct-to-consumer warranty marketplace but how about the manufacturer protection that comes with new cars? You may be surprised to know that car manufacturers also don't provide insured car warranties.
Discretionary Plans In Other industries
Car warranty plans are not the only industry where discretionary plans exists. There are discretionary personal healthcare providers such as Benendin providing an alternative to traditional private healthcare insurance. Thousands of UK doctors, dentists and students are protected with discretionary plans provided by the Medical & Dental Defence Unions. Companies like YouDoPet also offer pet owners discretionary healthcare cover. The largest provider of brown and white goods (electrical appliances) in the UK, Domestic& General, always provides discretionary warranty plans. If you have boiler cover, then this is highly likely to be a discretionary warranty with a service plan.
MotorEasy service and maintenance warranty plans operate on a discretionary basis. I believe the reasons for this, as underlined above, are plentiful and offer customers a better product, price and service. We use this discretion to ensure a fair and equitable resolution when it comes to warranty repairs and coverage. This is used to protect exposure against fraud and add flexibility to what will and won’t be covered on a case-by-case basis.