What is a Service Contract Company
The following offers a very high view of entities and elements involved in a Service Contract Company process. This is intended as a summary view to frame out several high-level components.
Seller
This represents the entity actually making the solicitation and sale of a Service Contract. This includes Retailers, Dealers and Marketers.Obligor
The Obligor (or Provider) is the legal entity that is issuing the Service Contract. The requirements for forming and operating vary by state and product type.Many states require some form of registration (licensing), form filing for terms and conditions, financial guarantees, officer and/or director biographical reviews and various other requirements.
Example product types include: vehicle service contracts, ancillary auto products, home warranties, consumer appliance, electronics products, other consumer products.
Examples of state information for a service contract company or provider. These regulations are subject to change and additional items may apply. It is important you review the latest information with appropriate legal and regulatory specialists.
Financial Guarantee
Most states have requirements for how an Obligor (Provider) must provide for the financial guarantee of a Service Contract.Financial guarantees are intended to protect the Contract Holder from the financial failure of the Obligor.
Financial guarantees may include cash reserves, bonds, a parental guarantee from an entity with substantial and defined net worth or a service contract reimbursement insurance policy SCRIP (contractual liability insurance policy).
Administrator
The Administrator is the entity providing customer entitlement, claim adjudication and payment of claims.Some states require registration of the administrator and some form of financial guarantee.
Service Entity
The Service Entity is a company the Administrator utilizes to perform repair or replacement services in fulfilling the obligations of the Obligor in the Service Contract.Contact Mike Frosch, Principal of Personal Safeguards Group, LLC for more information on forming and operating a Service Contract Company.
It is often not easy to form a Service Contract Company.
If you are seeking a SCRIP many carriers require significant revenue commitments, years of experience as an administrator and years of product performance experience.
If you are a newly formed entity or an existing entity taking a program in-house this can be a challenge.
PSG can help with direct support and support through established solution providers. It's not just knowing what you need, it's knowing the right place to get help.
Creation of Diligence and Financial Structure for SCRIP Provider
Obtain a Service Contract Reimbursement Insurance Policy (SCRIP)
Obtain a Service Contract Provider Bond
Regulatory and Compliance Support
Product Design & Development
Technology Solutions Support
Build, Buy, Partner Options
Click here to build a rate for a service contract or limited warranty by entering a few pieces of information. You can develop a rate using a model similar to how carriers and providers develop rates.