United Electrical Engineering (UEE) claims it wants to rid the third-party warranty business of its bad reputation by establishing a new industry body for IT resellers.
Company CEO, Vern Rickman, said the new Australian Reseller Association (ARA) was formed as a way of cleaning up the third-party warranty business. In the long term, he said the ARA would be converted into a non-profit industry body operating separately to UEE.
"The ARA will mean resellers can be part of a group recognised by the industry," he said. "We're taking this self appointing position to try to keep the industry honest."
Initially, the ARA is offering registered members a rebate scheme on the sale of UEE warranties - resellers get up to $60 back on every $199, three-year warranty sold. An additional $20 also goes to the sales consultant.
The rebates were available for IT and AV hardware, Rickman said.
"Resellers don't make much money out of hardware systems," he said. "But when you offer a three-year offsite warranty, the end-user is happy to pay $199 for it. Out of that, we're giving the reseller $80 back." Rickman said about 500 resellers had signed up to the ARA so far.
UEE expected to have 1000 members signed up by the end of June, he said. These resellers had come from the company's 4000-strong reseller database.
The next step would be to create a committee of resellers to oversee the ARA, Rickman said.
This could include appointing representatives from each state within 12 months, he said.
Despite registering the ARA under his own name, Rickman insisted UEE would not derive any funds from the organisation.
"We are not taking any profits out of the rebates," he said. "It is all designed to go back to resellers. As we build up the company, resellers will be controlling it and looking after the organisation.
"We plan to set it up as a trust eventually. I believe the industry needs to be cleaned up and become accountable. Somebody needs to take the first step or we'd never get there."
Rickman compared the new association to a Rotary Club, and insisted all parties helping to run the organisation would do so as volunteers. Similarly, UEE would donate the materials required to keep the organisation afloat, he said.
In coming weeks, Rickman said he would be appointing a new CEO for UEE, opting to step back from the daily operations and take up a chairman's role.
This would also help to distance him from the ARA, he said.
While Rickman was confident resellers would support the ARA, other warranty providers expressed grave concerns about the long-term independence of the association.
Whitebox Technology managing director, Gavin Ford, suggested the association was merely a new face on the UEE sales strategy. Ford said he agreed with the concept of an industry watchdog, provided all warranty providers had an equal share.
"They could have a logo, with a code of ethics and standards, where organisations, if they breached the code, could be cut out," he said. "I'd have no problem with that but it's not practical.
"Some organisations can be influenced by the people supporting them. There tends to be bias. That's why there are no successful organisations of this kind in our industry."
Rickman said he would encourage other third-party warranty suppliers to participate in the ARA.
"I get frustrated with competitors - the industry thinks we're all enemies trying to knock each other off," he said. "This has come from the 90s, when we had dishonest providers with stand over tactics. But I think other warranty providers could work in the ARA, provided they keep honest."
Warranty Assistance Australia (WAA) business development manager, David Holt, said a lack of financial accountability across the third-party warranty industry was a bigger concern.
"I cannot speak for others in the industry, but we provide an insurance underwritten product that is regulated by the insurance industry and associated legislation," he said. "The warranty industry needs to be regulated, with insurers handling the risk and providing the necessary financial peace of mind to end-users and resellers.
"Our industry, especially within the IT field, is littered with the corpses of failed warranty companies that took the risk on but did not have the necessary cash reserves in place to cover all claims. When has self-regulation ever worked before?"
Although it is not underwritten, National Warranties general manager, Don Card, said it had established its own contingency fund as a way of giving clients ongoing financial assurance. The fund is audited every six months, with the results publicly available.
"Insurance underwriting sounds fine, but in practice it is messy and time-consuming to invoke if a business goes broke," he said. "A substantial cost is passed onto resellers and clients, which, if the business and funds are properly managed in the first place, should not be needed."
Ford said he supported the idea of a trust fund because it ensured there was some money put aside for future repairs even if the warranty provider fell by the wayside.
"With this we'd know a portion of our money is safe," he said. "We've all been burnt by warranty companies disappearing over the years."