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Are You Meeting Consumer Demands?

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If you’re not providing home warranties, you may be missing out

By Maria Patterson

While adoption rates of home warranty sales in the real estate community have been increasing over the years, there’s still a wealth of opportunity that many brokers and agents are passing by. As consumers become more informed and more aware of the benefits provided by a home warranty, they are now taking matters into their own hands and buying home warranties from an increasingly varied array of sources-even the local electric company. In this exclusive interview, Mike Clear-president of Madison, Wisconsin-based HSA Home Warranty-explains why real estate professionals need to provide home warranties to clients, before they get them somewhere else.

An interview with Mike Clear, President, HSA Home Warranty

Maria Patterson: First of all, in your opinion, how has the home warranty evolved over the years?
Mike Clear: One of the ways it’s evolved involves price and coverage. Essentially, the price has been the same since the existence of the home warranty business-around $400 for more than 25 years. During that time, however, home warranties have evolved to provide more coverage and have removed some of the limitations. This has forced the home warranty industry to find better and more efficient ways to manage the business from an operations standpoint. We’ve also had to find better, more efficient ways to get things repaired in the home and develop better vendor relations. When you look at it in terms of dollars taken in, there is a much higher percentage going out to claims now than 25 years ago. So all in all, the home warranty is a much better product for consumers today than it was 25 years ago.

MP: Why are home warranties gaining popularity among consumers?
MC: Home warranties are a great deal for consumers. We’re trying to get things streamlined for consumers so they feel like they can make one phone call and we’ll take care of their home-repair needs from there. We’ve also gotten very smart about our supply chain. We can get things fixed cheaper, which allows us to keep our price point on the home warranty low. HSA is able to get things fixed quickly and inexpensively because we supply a lot of customers to these vendors; it’s just a much easier process for consumers. Consumers are informed and educated and can talk about you online and rate you. We take the power of open information very seriously and we embrace that-it gives us the chance to prove that we’re a top-notch company.

MP: If consumers aren’t learning about home warranties from their real estate agents, where are they purchasing them?
MC: Consumers are demanding the product and are not just buying home warranties through traditional companies anymore. Consumers Energy, for example, in Michigan, sold 160,000 home warranties to their customers. Consumers are much more in tune to the home warranty. We believe, however, that there is no better time to purchase a home warranty than at the time of the home sale. It’s a no-brainer. The penetration rate should be much higher throughout the real estate community.

MP: Is perception a challenge when it comes to selling home warranties?
MC: When I came from the insurance industry to the home warranty industry, I wanted to legitimize this product called a “warranty.” When you tell people about a home warranty, they tend to think of the negative connotations associated with the word “warranty.” They think of the “60 Minutes” piece on Sears and Best Buy, where companies make more on the sale of a warranty than the product. As opposed to electronics and appliances, with every home warranty contract, there’s a good chance that you’re going to use it to fix your kitchen faucet or when your air conditioner breaks down. Unless the consumer sees the value in home warranties, we as an industry are not going to survive. At HSA, we’ve put more pressure on ourselves to make sure that the consumer sees the value-for a $400 home warranty, they’re receiving coverage on many items in their homes.

MP: What makes a home warranty different from warranties in other industries?
MC: I’m not trying to diminish the warranty industry. I saw all sides of the warranty business when I worked in the insurance industry. I audited all types of companies-auto, electronic, appliance. Compared to warranties in those industries, though, I know that the home warranty for consumers is a very good product. And the consumer now knows it, too. Today’s consumers are the driving force behind many things. If we don’t provide value to the consumer, we’re not going to be around.

MP: Why is the real estate professional the most logical person to sell warranties to consumers?
MC: The real estate industry has the best shot at selling to the consumer. In California, the adoption rate
of home warranties is 91%. It’s 20-30% in the Midwest and 10-20% in the East. Independent surveys have shown that if an agent recommended a home warranty, 82% of the time, people would buy it. The problem is that agents are not always recommending it, so consumers are getting it elsewhere. My question to agents is, “Why not provide that service to clients? Why not be the one to guide them in making this decision?” We want to keep the consumer in our portfolio for the next 20 years-this is a great way to help do that.

MP: Is the risk management aspect of home warranties still an important factor for agents to consider?
MC: Yes. It’s the only proven risk management tool that an agent has to protect themselves against post-sale issues that may arise in the home. Without a home warranty, if something goes wrong with the mechanical systems or appliances in the home, the consumer is left without any alternatives but the legal community. If a home warranty is in place, the consumer turns to HSA for resolution instead of the agent. The consumer could then look at the agent and say, “thanks.” Home warranties help manage those risks and they will play that role forever.

MP: Home warranties go beyond risk management for agents, however. Can they actually serve as a business-building tool as well?
MC: Home warranties play a big role in building referrals for agents. Every home warranty company notifies the agent when their client calls in a claim. This provides the agent an opportunity to have a valuable conversation with their client versus mailing a postcard to them. Additionally, beyond the first year, we are more successful today than ever before in renewing contracts for multiple years. We continue to have claims payments each successive year, giving the agent additional opportunities to communicate with their client and gain referral opportunities.

In anything we do in business, if it is not meaningful to the customer and client, it can actually be offensive. I always put myself in their shoes and ask myself, “Would I want this or would this just get on my nerves?” If someone called and had something meaningful to say that related to my circumstances, I’d appreciate their call.

MP: Please explain what you mean at HSA by a “Contract of Convenience.”
MC: In today’s society, everyone’s schedules are busy and when a failure occurs in their home they don’t have time to search for a service contractor or get multiple bids for repairs. With a home warranty in place, they make one quick call to HSA and we dispatch a service contractor to take care of them. If something breaks in the home that wasn’t pre-existing, we’re excited to pay that claim. We want to help that consumer and provide service quickly and conveniently. That’s the Contract of Convenience.

MP: Why are home-related repairs more convenient through a home warranty than other avenues?
MC: When air conditioners break, for example, they usually break in mass when there’s a heat spike. Everybody then calls the local heating and cooling vendor and you get placed on this long list and may have to wait days for repairs. With HSA, we have a lot of relationships and provide a high volume of demand to the heating and cooling companies. We can get someone out there much quicker than the consumer just calling on their own.

Also, when people relocate, they don’t know who to call. They can simply make one phone call to us and get someone to the house faster than they could ever do it on their own. That’s the Contract of Con-venience-the ability to make one phone call and have it done. This helps the agent, too-it makes the agent look good by providing this very high level of customer service.

MP: How does HSA help ensure that this high level of customer service is delivered on behalf of agents?
MC: We’re not in the business of trying to find ways not to pay the customer. We want them to get the service they need and deserve, and to be happy. We use every measure we have to ensure outstanding service-from the speed in which the problem is treated to when the claim is paid. We invest a lot of time and energy-and significant dollars-toward customer service. The last thing we want is to cause an agent to lose a client. We also have a vested interest in keeping the consumer happy-we want to keep that customer forever!

MP: Where do you see the home warranty business headed in the future?
MC: The biggest companies are going to survive and be able to leverage their intellectual property, their supply chain and their business to be more competitive. That’s why we embrace technology in creative ways to get consumers’ repairs fixed as quickly as possible.

We have two clients: our real estate partners and our customers, the homeowners. They are both customers and both clients. We have to make them both happy. Everything we do is to make our product more valuable to clients and customers. When I came into this industry, my goal was to make home warranties a well-liked product. The real estate industry has the best home warranty product out there-it’s designed to make real estate professionals look good. RE

HSA Home Warranty: At a Glance

A privately-owned home warranty company based in Madison, Wisconsin, HSA Home Warranty offers comprehensive home warranty plans and Error & Omissions insurance to the real estate industry throughout the country. HSA’s home warranty plans provide valuable protection for homeowners, safeguarding them from the expense of mechanical and appliance failures in their home.

According to HSA, the company’s success over the past 23 years is based largely on the long-term partnerships they’ve formed with their clients, and the company’s ability to provide flexible, personalized service to each and every warranty customer. This success is reflected in HSA’s impressive sales growth: 25% each year on average for the past four years.

The HSA Success Plan:

Philosophy
HSA believes in creating clients for life by providing long-term value for homeowners. When something breaks down in their home and they experience, first-hand, the relief of getting the problem taken care of promptly and reliably, the value to homeowners becomes clear. Their positive experience leads to the renewal of their warranty contract year after year. It also means more business for the agent in the form of referrals from these satisfied homeowners.

Technology
HSA employs a group of creative and innovative developers who work continuously to stay one step ahead of the industry and provide customer-centric solutions. Between a state-of-the-art call center and a custom database application, the company has the flexibility and innovation to incorporate new technology on demand. Customer expectations are changing as quickly as technology is. Today’s homeowners are more dependent on electronic communication than ever before. In order to continue to meet customer expectations, HSA is committed to constant improvement in order to create customers for life.

Products
HSA makes every effort to provide the best possible home warranty products on the market. Comprehensive coverage allows the company to pay claims and keep homeowners satisfied. This, in turn, keeps clients satisfied and reliant on HSA as their source for home warranty products and services, including resale and new construction warranty programs, E&O insurance coverage and risk management education.

Service
Customer service is the top priority at HSA where great lengths are taken to provide outstanding service to both its partners in the real estate industry and to contract holders. HSA customer service representatives are available 24 hours a day, seven days a week. Each one is highly trained and held to a series of high performance standards.

For more information, please visit www.onlinehsa.com.

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