Situation
Any OEM (original equipment manufacturer) that offers a warranty knows the challenges that come with validating warranty claims. For a mining equipment provider, their equipment needs regular inspections and maintenance to remain operational. They provide high-performance and high-value assets. So, the costs associated with warranty claims caused by neglect can add up to a substantial amount. The OEM industry average for fraudulent warranty claims is 10 to 15% of all submitted claims. This mining equipment manufacturer provided their customers with a one-year warranty that came with a disclaimer that the customer had to properly maintain and operate the equipment. However, they wanted to maintain positive customer relations, which is challenging when questioning a customer’s maintenance history and claim validity. The company began looking for a solution that would support customers in properly maintaining and operating their equipment, as well as provide a clear way to validate submitted warranty claims.
Action Items
Near the beginning of 2021, the mining OEM partnered with Redlist to solve their issue with maintenance-based warranty claim validation. Within Redlist, they built easy-to-follow and complete maintenance schedules and training for each piece of equipment they sell. The OEM began including a one-year subscription to Redlist as part of their equipment purchase. Each account came pre-loaded with the maintenance and training for each piece of equipment they purchased. For the length of the warranty, the OEM retained access to each customer’s Redlist account to log in and view their maintenance history whenever a claim was submitted.
Impact
The impact of Redlist implementation benefited both the OEM and their customers. Total warranty claims dropped due to improved maintenance and operation of equipment. This is a huge value-add for customers, as they don’t have to come up with their own preventive maintenance plan or dig through equipment manuals or PDFs full of generic information in order to find recommended maintenance schedules. Instead, it is handed to them in an easy-to-use and track mobile app. The benefit for the OEM was the ease of warranty claim validation, which enabled them to stop paying for fraudulent claims. Furthermore, the OEM was able to extend their standard warranty program from 12 months to 24 months (or 3,000 operating hours) due to the reduction in total claims and the reduction of fraudulent claim payments. They also now offer customers a lifetime rotor warranty, a 4,000-hour critical components warranty, new or authorized reconditioned repair parts, wear part and consumable replacements, and labor for repairs if needed. Their new warranty terms make them the best in class and the first in their industry to offer a two-year warranty. The OEM expects an increase in future business, as their competitors only offer a one-year warranty. By providing a maintenance-based warranty management program, the entire experience is improved for the OEM and their customers with clear coverage, easy tracking, and no need for questioning warranty terms.
