Vendors getting tougher on warranty abuse - study

Systems for dealing with warranty abuse carried out by partners are evolving rapidly, according to research by CompTIA and AGMA

Vendors are making headway into tackling warranty abuse perpetrated by rogue channel partners, according to a new white paper.

In 2009 the Alliance for Grey Market and Counterfeit Abatement (AGMA) calculated that warranty abuse – which refers to the usage of services or warranty to which the customer or recipient is not entitled – was costing vendors three to five per cent of their revenues. At the time, AGMA described it as a "relatively unknown" issue.

Now AGMA has teamed up with industry association CompTIA to release a white paper on the issue following a two-year study involving 400 service providers and 15 OEMs. According to the duo, systems for dealing with warranty abuse are evolving rapidly as the industry switches from taking a reactive to a proactive stance on the issue.

"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," said Aaron Woods, a director at Xerox and CompTIA board member.

The white paper flagged several best practices to help both OEMs and their partners cut warranty abuse, thereby increasing profitability.

This includes using OEM controls for parts identification and implementing clear end-user rules. Employing internal warranty claim administrators who monitor end-user and technician part usage and procedures was also recommended, as was using standard file formats to allow service providers and OEMs to communicate in real time during each step of the warranty process.

Common forms of warranty and service abuse include exploitation of RMA non-returns, service over-usage and non-existent service charges, according to AGMA.

Angela Narvaez, an HP director and AGMA board member, added: "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 occur, you can never fully recover the loss."