Gregg Lehman, president of Signet Financial Group Inc., of Vacaville, Calif., says that since 1999 the company has offered refund agreements that are separate from service contracts.
Making the refund agreement distinct from the underlying service contract avoids consumer confusion and aids term disclosure, Lehman says. For example, the service contract might specify a termination date based on vehicle mileage, while the refund agreement might specify termination at a specific month and year.
"It is much cleaner disclosure to the consumer," Lehman says.
Signet has remained in the market because it specializes in the refund business, Lehman says.
"We have a long-standing history with it," he says. "We are not the least expensive, but we are right-priced.
"We are very selective about the length of the term of the contract and the type of coverage being provided on the underlying service contract. We look for longer term contracts with a high level of stated coverage. For example, we don't take powertrain-only coverage.
"We are the converse of what a service contract company is looking for," Lehman says. "They don't want claims. We want longer term, higher claim-frequency contracts."
Dealer liability is minimized, Lehman says. "Signet is the obligor, not the dealership," he says. "We minimize dealer liability by securing insurance to guarantee our ability to pay our refunds."
The company presents the refund guarantee as a promotional program. "It is not an insurance product. It is a promotional program designed to help dealers sell more service contracts," Lehman says.
Lehman disputes the notion that the business lacks growth potential.
"There are second and third generations of consumers coming in and asking for it by name," he says of the refund program. "We would see this becoming something every consumer asks for. Why wouldn't they? They get the benefit of a service contract and the benefit of money back at the end of the term. It's a win-win for the consumer."