Tuesday, August 13, 2013

LED Signs, Need to Know: Insurance and Warranty

In the time of King Hammurabi the first hint of today’s modern insurance appeared, carved into a Babylonian obelisk monument. It came to be known as the “Hammurabi Code” and offered a type of basic insurance when a debtor couldn’t repay loans due to a catastrophe- death, flood, disability and more.

Insurance underwriting appeared in the 1600’s as shipping interests between Europe and the Americas started to develop.  Edward Lloyd, an owner of a coffee house, was one of the first to explore this new concept as he provided a meeting place welcomed ship owners and merchants seeking insurance. Does the name Lloyd seem familiar? It should be as Lloyd’s of London is now universally known as a provider of insurance across the globe.

Today fire insurance, property insurance, health insurance and life insurance provide protection and, in the case of life insurance, establish immediate estates for the surviving family.

The basics are simple- spread the risk around, so everyone pays a little to prevent any one person from losing it all.

LED Signs:
If anyone has been involved in the LED sign industry one truth should be clear- stuff breaks. No argument there. If you sat on a pole, 24/7, through storms, heavy traffic, power surges and other insults eventually one of your LED modules might give up too!

What separates a quality LED display from a poorly designed LED display is how often it breaks.  Is it okay for an LED display to fail once per year?  While you may see a service truck out monthly repairing an imported LED display, that high frequency of repair is not common on USA produced products. So, let’s assume one service call per year on your quality LED sign.

Assumptions & Calculation of Service Cost for a Quality Sign Ownership:
Average length of time the sign is owned- 8 years.
Average man hours per service incident- 4 hours at $100/hour.
Average parts cost- $150
Lifetime service cost of ownership = 8 x (($100 x 4) + $150) = $4,400
That’s a lot of money. Wouldn’t it be better to help defray that cost with a 3rd party insurance plan that had a guaranteed life even beyond the life of the manufacturer or the insurance company?

Warranty versus Insurance:
Is insurance a warranty, or is a warranty some kind of insurance? I think the answer to both questions is “yes”.

It’s smart to ask “what iron-clad assurance can you give me that your LED Sign warranty obligations can be met?”

What if the manufacturing plant slides into the ocean? What if an F-5 tornado hits the plant and wipes out everything?

Did you know that many warranties extended by LED sign distributors and so-called "manufacturers"are not even legal technically? State law tries to help determine how warranty execution is guaranteed in the event the company offering the warranty fails. Many companies ignore these laws against "self insuring" and attach some ridiculous warranty period to their product at the same time they are struggling to pay for their next imported project from Shenzhen, China. They may be one sales deal away from failure as their cash flow approaches zero.  The warranty is as good as their next sale.

Remember the old game of chance where you have 3 cups and a ball? What cup is the ball under? Don't let the old chancy game of "self-insurance" make you guess who's paying for the service.

Having a 3rd party warranty provider, an insurance company, one deeply involved in the industry who conforms to the legalities of warranties, with reserve funds established is the best way to go. This way service execution is guaranteed even if the 3rd party warranty provider’s company were to fail. The warranty, or the “insurance” has a life of its own.

Many sign companies and certainly many end-users of LED displays never consider this. However when the time comes for warranty servicing and the upstart "flying by the seat of their pants" LED sign "manufacturer" has long ago closed its doors and folded its operation, the installing LED sign company quickly realizes it has to service that cheap LED sign over and over again. Live and learn, huh? Not too many times however to stay solvent.

Ensure that your project is insured, and that a warranty creates true added value for you and your customer. A 3rd party insurance protection plan provides that assurance.

These comments belong to me, Mike Prongue, and do not reflect the views, opinions, hopes or dreams of anyone else, anywhere else and this includes Vantage LED. I appreciate your constructive opinion which may be sent to me at michael@vantageled.com.   

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