A surefire way to cut business costs

Is your company in trouble because of high costs?

Well, rejoice. Three European companies have just shown us the way. Euler Hermes, Atradius and Coface, which insure auto suppliers against the credit risk of an automaker failing, canceled coverage on General Motors and Ford.

Apparently, the insurers suddenly recognized one or both automakers actually could fail. Now that the insurers’ risk of payout is real, rather than remote, they back out of their deal with their customers.

Now on the surface, this sounds like bad news for the suppliers. They must be frustrated at paying fat insurance premiums for years only to lose the coverage just when they need it most.

But suppliers miss the big picture. Their insurers unlocked the way to vast savings.

What’s a major cost for any manufacturer? Warranties. Fixing what broke is kind of a promise, almost like, you know…insurance.


Plug in modern sensor and wireless communication technology and this dodge can work for anybody.

Brake suppliers: guarantee brake pads forever, except, of course, in case of owner abuse. Just install sensors that signal when pads wear down, so you can mail a notice that “pad 00014758 has been subjected to abuse.”

Automakers: Offer 500,000-mile powertrain warranties, but add wireless coms to the “check engine” light and instantaneously e-mail the “failure to heed warning” cancellation.

Lots of practical uses

Once you start, there are applications everywhere.

Car insurers would need a lightning fast system to issue “poor driving habits” cancellations between seat belt pre-tensioner activation and airbag deployment events, but the savings would quickly pay for it.

Health insurers? Try sensors 10 feet outside emergency room entrances. Life insurers? Sensors inside pacemakers.

Bet your buddy $1,000 on the Michigan-Ohio State game. If your team is three touchdowns behind in the fourth quarter, call your pal: “Hey, just kidding.”

Think I’m too cynical?

Tell you what. I’ll apologize to Euler Hermes, Atradius and Coface. Right after they refund the past premiums they collected from suppliers.

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