After the OFT studied the extended warranty market, they found competition concerns, as listed on the OFT website:
- Competition remains limited by the retailers’ ‘point of sale’ advantage in being able to sell extended warranties at the same time as they sell the electrical goods.
- Only around a quarter of consumers shop around for extended warranties, which remains low compared to many other insurance products.
- When buying an extended warranty at the same time as an electrical good, shoppers do not have enough relevant information to make an informed decision about whether the extended warranty is value for money.
- Pay As You Go (PAYG) warranties, where shoppers pay for a rolling monthly contract, can be very expensive if held for lengthy periods and can be considerably more expensive than comparable fixed term warranties.
In response, U.K. electrical retailers have offered undertakings to avoid the OFT referring the market to the Competition Commission. Dixons, Comet and Argos offer to improve information to shoppers and to launch an extended warranty comparison website.
Source: OFT Press Release