top of page
  • Writer's pictureMegan Connor

Planned obsolescence & appliance claims: what adjusters should consider

Updated: May 9, 2023


Planned obsolescence is a business strategy where companies design and produce products with a limited lifespan to encourage consumers to replace them more frequently. The concept of planned obsolescence has been around for decades, but it has become more prevalent in recent years with the rise of technology and consumerism.

One area where planned obsolescence is particularly prevalent is in appliances, such as refrigerators, washing machines, and dishwashers.


Many of these appliances come with claims of durability and longevity, but in reality, they are often designed to fail after a certain amount of time. This can result in expensive repairs or replacements, leading to frustration for consumers and a steady revenue stream for manufacturers.

One of the ways manufacturers achieve planned obsolescence in appliances is through the use of cheap, low-quality parts. These parts are often designed to wear out quickly, resulting in an increased likelihood of failure from a loss event, such as a power surge, lightning, or water exposure.


This entirely legal business strategy has served appliance manufacturers for decades. While arguments have been made that planned obsolescence benefits consumers by encouraging innovation at lower price points, what are the impacts of this strategy on the claims process? Moreover, how should adjusters consider this economy-wide phenomenon when handling claims involving appliances?


Planned obsolescence & assessing repairability


As mentioned, there is nothing new or revolutionary about planned obsolescence in household and commercial appliance manufacturing. Over several decades, appliance manufacturers have prioritized driving down the bottom line by using cheap parts, assembled at low labor costs.


In turn, prices for new appliances have decreased, and the consumer mindset has shifted. Because appliance prices are lower, consumers have become accustomed to dealing with more frequent appliance failures, and the concept of needing to re-purchase essential appliances more frequently.

In claims, planned obsolescence most significantly impacts the repairability of a commercial or residential appliance. When assessing the potential repairability of an appliance, such as a refrigerator or washing machine, you will want to consider the following questions:



1) What is the cause of the damage?


Presuming the appliance is exhibiting one or more issues, the most important question to ask yourself is what is the cause of the damage? This will inform the potential repair options greatly. While some sources of damage may be fairly obvious, such as physical damage from a fire, most of the time, assessing the cause of loss is not so obvious.


Testing by an expert is typically required to determine the specific cause of the appliance failure, and which repair options should be considered to restore the appliance to pre-loss condition.




2) Are repair parts still available for the model?

How old is the appliance? Is the technology outdated or irrelevant in the current market? Is the manufacturer still in business? What is the current state of the manufacturer’s supply chain with respect to replacement parts?


These factors, and many more, may contribute to the availability of original equipment manufacturer (OEM) repair parts in the current market. If repair parts cannot be located in the current market, replacement of the appliance must be considered.



While exact manufacturer criteria vary by company, it is not uncommon for major appliance manufacturers to carry certain parts for a longer period of time than others. This typically has to do with the cost and function of the repair part.


For example, GE may carry a condenser fan blade for a refrigerator for a longer period of time than a main electronic control board. This primary circuit board is a more expensive part, that is more vulnerable to irrelevance in the market as technologies improve. Manufacturers are incentivized to limit support for these types of parts, in order to sell more new appliances.



3) What is the cost of a like kind and quality replacement?

It can be easy to assume that repair costs will be less than the full replacement cost; however, this is not always the case. Depending upon the extent of damage, both external and internal, the cause of loss, and the availability of new condition OEM repair parts, repair attempts can become cost prohibitive.


When evaluating whether or not repair attempts would make sense from a cost perspective, you will need to know the damaged part or parts and the approximate labor cost to complete the necessary repairs.


Additionally, you will want to consider if any extra costs are associated with the needed repairs. For example, when replacing a compressor in a refrigerator, you will want to consider the cost of recharging the new compressor with refrigerant. Newer smart appliances also may require reprogramming by a service technician in order for the repair to work properly.


As costs for parts and labor continue to rise, it is becoming increasingly important to consider the cost of replacement when evaluating appliance failures.




Conclusion


Planned obsolescence is not going anywhere. Manufacturers will continue to be incentivized to use low-cost, low-quality parts to sell appliances more frequently to consumers and businesses.


In light of this inevitability, adjusters should consider the repairability of appliances with confirmed damage from a peril. Assessing the repairability of an appliance involves three phases:


1) What is the cause of the damage?

2) Are new condition OEM repair parts available in the current market?

3) What is the cost of a like kind and quality replacement?


Investigating these three components is essential to accurately determine whether repair or replacement is the most cost-effective and FEASIBLE course of action. The answer may not be as obvious as you think!







Need assistance with an appliance claim? Reach out to Zap Consulting today.

Comments


bottom of page