Most retailers traditionally offer extended warranties, but the situation is far from ideal. Extended warranties sold with the appliance tend to be expensive. A five-year warranty on a washer/drier costing upwards of pounds 300 can cost from pounds 150 to pounds 250, of which 30 to 40 per cent will go to the retailer as commission. This represents an attractive boost to the retailer's margins and a swingeing on-cost to the original investment.
The Office of Fair Trading has had some hard words to say about sales people pressuring buyers to sign agreements on the spot and the lack of information on the alternatives. It is not surprising that 82 per cent of buyers turn down the deals they are offered in the shop, and only 10 per cent of them subsequently buy a warranty somewhere else, largely because they do not know where else to go.
It now looks, however, as if a new kind of policy covering all domestic appliances after manufacturers' warranties have expired is being created. Sun Alliance Connections launched a general warranty plan last year, aimed initially at existing customers. It insures individual items and provides a free call-out and repair service.
Last week, TSB launched a plan allowing householders to insure specific items up to seven years old for as little as pounds 2.50 a week each, covering charges, parts and labour on approved engineers. Rates rise with the age of the appliance. The minimum premium is pounds 5.
This week Norwich Union Direct moved into the market, offering a warranty covering any number of major household gas and electrical items, including fridges, freezers, cookers, microwaves, washing machines and driers, TV and video recorders, hi-fi and satellite dishes (but excluding at this stage electrical mains and central heating) up to eight years old, for a universal premium of pounds 7.95 a month. If an appliance breaks down, NU Direct will arrange for a service engineer to call and repair it with repairs guaranteed. If the appliance is less than five years old and beyond economic repair, it will be replaced free. Over five years old, if the repair exceeds 50 per cent of a new replacement, NU will offer a 25 per cent discount on the RRP of a replacement from NU's approved network. If the item turns out to be more than eight years old, the NU service will repair it, but the policy-holder will have to pay. It could be the start of a whole new ball-game for householders willing to pay for peace of mind and a comprehensive service if appliances go wrong.