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VOL. 127 | NO. 31 | Wednesday, February 15, 2012

Growing Field

American Home Shield expands home warranty business

By Bill Dries

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The days of buying a home appliance warranty and waiting for the appliance to break down are changing.

Instructor Brian Knox helps Tatiana Johnson in a training class for new hires at the American Home Shield call center. Students get familiarity with hot water heaters, furnaces, evaporator coils and other appliances. 
(Photo: Lance Murphey)

The president and CEO of American Home Shield says the business is changing to become more about the kind of preventative maintenance that businesses have relied on for some time to avoid unplanned work stoppages. And homeowners want 24-hour access as well as options that might include not having a home warranty but include the ability to get home repair service.

Dave Crawford admits American Home Shield’s technology is a bit dated. The business, which is a part of Memphis-based The ServiceMaster Co., is 40 years old. Crawford started with the business on the sales side in 1987, two years before it was bought by ServiceMaster. He moved with the company to Memphis from California in the 1990s.

“We’re going through a whole repurposing and investment into our technology platform,” Crawford said this month at the Memphis call center as AHS prepares for a March rollout of new technology. “It will be a very flexible system that is something we are able to build upon. In the past it was static. It didn’t serve a growing company. It served a rather stale company, for lack of a better term, that wasn’t necessarily broadening its market.”

The home warranty business nationally amounts to $1.5 billion annually, with Crawford estimating American Home Shield has half of that. He puts home repairs and maintenance at $1 trillion in sales annually. That is the new direction AHS began moving with some deliberation toward starting in the fall when the preventative maintenance plans for homeowners were first offered in 18 states.

“That’s really the space that we serve when you think about how you fix and repair and replace someone’s home systems and appliances,” Crawford said. “But we’ve only thought of ourselves in the home warranty category. Once we broke through that limiter for ourselves, that broadened our horizon.”

American Home Shield works with 10,000 independent contractors and operates in 49 states. The goal is to expand the preventative maintenance plans to all of them sometime this year.

The greatest demand for claims is in heating ventilation and air conditioning systems (HVAC).

“But quickly appliances are really starting to grow with us,” Crawford said. “I think it has a lot to do with the electronic boards that are starting to be the memory system of appliances. Before that was not a big deal.”

The HVAC work is seasonal with American Home Shield using models based on regular changes in climate to adjust work schedules but be flexible enough to handle an unexpected drop or rise in temperatures.

Instructor Brian Knox leads a training class for new hires at the call center for American Home Shield, the division of Memphis-based The ServiceMaster Co. that does home appliance warranties.

(Photo: Lance Murphey)

Locally, AHS has nearly 700 associates and uses 50 contractors to serve 55,000 clients here.

The call center has a training component that trains operators to deal with contractors and approve spending for parts and repairs at a certain level. The room includes a set of appliances that help those being trained see the parts and systems they are passing judgment on.

Crawford says the economic impact is real as some workers double up in cubicles and others work from home.

“That will only fuel more work into the marketplace,” he said. “The reality is we’re growing and we’re putting people in the employment ranks.”

The contractors’ certifications are checked and their performance graded by customers and by metrics AHS uses to rate them in more than a dozen areas. But the company maintains a thought-out balance for using the contractors.

“Ideally we would be about a third of their business,” Crawford said. “We don’t think it’s best for us to be the lion’s share of their business but to find a balance that’s good.”

The contractors will be a critical part of another change in American Home Shield as the company seeks to offer extended service contracts for multi-year new systems like HVAC systems.

“There are many points of insertion in the supply chain,” Crawford said referring to contractors who might recommend an AHS contract as they install or service a HVAC system or a retailer could offer it as an option.

There is some concern that the trades involved in home repairs and maintenance aren’t drawing enough students with degrees in technology-related fields.

“They’ll look more toward computerization, animation and computer repair as opposed to some of the trades that we serve,” Crawford added. “I would say capacity for trades is a tough obstacle at this juncture. There are still people coming in but not as many as we want.”

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