Why Centana Invested in WarrCloud

By Eric Byunn | Co-Authors: Devi Malhotra, Marshall Cao

Auto warranty claims is the largest $25bn market you’ve never heard of

The auto repair business is an important, sizable revenue opportunity for the dealership. When a vehicle is brought to a dealership, typically 20% of repairs are under warranty. The average dealership in the US does around 250 warranty repairs per month, and at an average of $500 per claim, representing a $1.5mm (per year) revenue opportunity for the dealer, and $25bn US market opportunity¹! The fixed operations department (which covers warranty and other services) is one of the most profitable business units at a dealership, contributing 50% of total gross profits¹. As dealers continue to face margin pressure due to inflation and rising labor costs, the business of handling warranties effectively and efficiently is becoming increasingly important.

Despite this importance, the current warranty administration process has not materially evolved in the past 30 years and remains unnecessarily expensive and cumbersome. It is a complex process, involving thousands of codes and hundreds of pages of manufacturer-specific rules, spanning numerous forms, documents, and systems, and requiring precise and timely adherence to receive payment. Most dealerships in the US market (70%)² manage this process largely as they always have, hiring and training one or more dedicated warranty admin claims professionals to focus on submitting claims on behalf of the dealership. These warranty admin staff can be expensive, but more importantly have become more difficult to hire and retain due to the often-monotonous nature of the role, complex processes, uncompetitive pay, and in-office requirement. Dealers not wanting to hire their own warranty admin staff can outsource this function to a temp agency, which does provide the benefit of scale, but our market research suggests these players have limited or no technology and are expensive (typically charging as much as 4-7% of total claim dollars).

Relying on one or a few in-house warranty admins can be even more expensive and risky than described above, since dealerships initially pay out of pocket for warranty parts and services, so if the claim takes too long to be submitted or is submitted incorrectly, this could result in either the dealership not being reimbursed for some or all of that expense or a larger than necessary working capital requirement as they wait to be paid. In addition, auto manufacturers may audit dealerships on warranty claims processed, and are more likely to do this if there are frequent errors or late submissions. Processing mistakes can result in fines up to millions of dollars, with even more severe consequences for repeat offenders.

Auto warranty claims administration represents a large, legacy industry ripe for disruption.

WarrCloud is the best technology player tackling this space

We are excited about WarrCloud because our research has shown it has the best tech-enabled auto warranty claims processing solution. WarrCloud has built a proprietary workflow and AI platform that assists their in-house warranty administrators to process claims in a faster and more reliable manner on behalf of dealership customers, reducing costs and increasing revenue at the dealership level. It’s a more cost-effective and scalable solution for dealerships, eliminating the need to hire a warranty administrator (and the peace of mind that comes with it) while boosting revenues by better identifying the full scope of claims in each repair order.

WarrCloud charges the typical dealership substantially less than hiring a warranty administrator, plus data indicates a 12% increase in warranty services revenue for the dealership.

WarrCloud has developed relationships over many years across the automotive ecosystem to build its proprietary platform. WarrCloud’s engine can ingest repair order (RO) data, automate the review and matching process consistent with the OEM’s policy manual, and submit claims to the OEM CMS, significantly speeding up both the claim processing timeline and speed of payment. WarrCloud warranty administrators communicate with dealerships to obtain RO information and supporting documentation and oversee the claims submission process to ensure accuracy and timeliness.

We are thrilled to be backing Jim Roche, WarrCloud’s Founder & CEO, along with the highly experienced team he has assembled. Jim is an industry veteran, with 30+ years building and working in the automotive tech industry, with a focus on services and repairs. His career has spanned roles at Cox Automotive, Xtime, Newgen, and Tricom. He previously founded Auto Point (customized marketing tech for the auto industry) and is also a published author. Jim has brought together a very strong, automotive-focused management team who have worked together in multiple prior endeavors.

What’s next for Centana’s investment in WarrCloud?

Centana has deep expertise in investing in solutions serving the broader financial services ecosystem, including a strong focus on insurance and insurance-like products. Insurance industry veterans consider warranties to be an aspect of insurance, and certainly the claims process has a multitude of similarities to claims in other insurance categories, whether P&C or health care (i.e. revenue cycle management), both categories in which Centana team members have significant prior experience. Centana’s other investments in the broader insurance claims-related category include Gradient AI (predictive analytics solutions), One Inc. (insurance payments for premiums and claims), and ZestyAI (property risk analytics).

We are excited by WarrCloud’s explosive growth and the technology and automation the Company has built to solve a long outstanding pain point, as well as the massive greenfield market opportunity that it is well-positioned to capture. We look forward to supporting Jim and team as they further deepen their relationships throughout the industry and continue to develop automation and increase efficiency both within existing and across new automotive technology, manufacturers (OEMs), and dealership partners.

[1] National Automobile Dealers Association. (2023). NADA Data 2023.

[2] WarrCloud. (2024). Internal Data