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Originally Posted by bmussatti
Glad it worked out for you, Chris. It was also worked out great for Warranty Direct!
For example, there are over 13,800 members on this Forum. What if they purchased an "engine warranty" from Brucelee for $1,000. And just 1/4 of us signed up for the policy.
In the years I have been a member, I can only remember a handful of expired engines. I can't even think of 10. But let's just exaggerate the number to 100.
Here are the potential financials:
3,450 "policy holders" (13,800 x 0.25)
$1,000 policy premiums
$3,450,000
-$1,500,000 for failed engine claims
-$50,000 (my business plan fee!  )
$1,900,000 potential profit.
Now imagine the profit if more members agreed to the policy and we did not exaggerate the number of failures. |
I think you analysis is flawed. Assuming that if the insurance company wins, the individual policyholder loses is not the way to analyze this issue. If that were true, there would be, on balance, no insurance industry.
The real issue is that each person has a different risk apptetite and a different ability to ASSUME risk. So, for some folks, the warranty is appropriate and for others (maybe you), not.
That is fine. No one HAS to purchase insurance on a used car. Many do. The ones that file a claim and WIN, seem happy. The ones who never had a claims have still received something, the protection against a claim.
All in all, a good system.
PS-I think your math on the 10 engines failed is WAY OFF.
I have been around for 4 years and this issue is not an aberation.
