[PLUG] Laptops and warranties

[Paul Heinlein]

On Mon, 7 Aug 2006, Dwight Hubbard wrote:

> Like you said the warranty is a bet.  Just like in Vegas the 
> companies offering the warranty have done the math and made sure 
> they will on average make more money off of you than they pay out.

The trick is in how they cover the warranty expenses.

I've heard from fairly reliable sources that of the types of insurance 
carried by most people -- life, health, homeowners, and auto -- only 
auto policies are able to create profits on their own. The others are 
all break-even or losing propositions.

Companies that offer those types of policies are often little more 
than brokerage houses -- using premiums as cash flow to fund their 
investment portfolios.

With laptops and warranties, the question becomes, do laptop 
manufacturers fund warranty work strictly from warranty fees or do 
they underwrite part of the warranty expenses by building some extra 
cost into all machines.

I can imagine the logic working this way:

 * people who buy laptops are not cheapskates

 * people who buy warranties are not cheapskates

 * people who buy warranties are risk-adverse and likely to stick
   with a brand that works rather than buying from this month's
   lowest-price vendor

 * it's worth encouraging a longer term relationship with these
   folks, since there's a reasonable chance that this type of
   person *wants* to be a repeat customer and avoid changing
   vendors

 * let's underwrite part of the warranty costs with a mild price
   bump on all laptops

The corporation loses only if a huge percentage of customers purchase 
warranties. It actually makes more money if fewer customers do, since 
everyone is paying part of that cost anyway.

-- 
Paul Heinlein <> heinlein at madboa.com <> www.madboa.com