Five Key Differences Between Home Warranties and Insurance

Philipp Von Holtzendorff-Fehling discusses the misconception that home warranties are the same as insurance, and enlightening the public about its differences with marketing strategies that work

Philipp von Holtzendorff-Fehling’s diverse skill set and global business perspective has taken him around the world in a variety of roles and just as many industries in Germany, Spain, France, Ireland, and South America. These days the German native proudly finds himself in Memphis, Tennessee, in a role he says is one of the most interesting he’s ever held: vice president and chief marketing officer of American Home Shield, the United States’ leading provider of home warranties and a subsidiary of ServiceMaster. Here, the multilingual leader talks to Profile about what home warranties have to offer compared to insurance and why they’re so underutilized, as well as his most effective marketing tactics.

Before joining American Home Shield, were you familiar with the concept of home warranties?

Honestly, I heard the term for the first time about six months before I was reached out to about this position. When my wife and I were buying a new home, our real estate agent recommended buying a home warranty. I’m from Europe, where such a service doesn’t really exist.

Is part of your challenge as chief marketing officer helping people understand the differences between home warranties and home insurance?

Awareness surrounding the product is very important and part of my job is reflected in the campaigns we’ve created. Right now, we have a new campaign, our Chances Campaign, which focuses on the differences between home warranties and home insurance. There are big differences, and generally a lot of people don’t know what each covers. People are very pleasantly surprised by what warranties cover—and the peace of mind—which is why our retention rate is so high.

Can you explain the difference between home warranties and home insurance?

There are a few key facts. Homeowners’ insurance typically covers what might happen to your home: tornadoes, fires, etc. Warranties cover breakdowns and replace or repair up to twenty-one home systems and appliances, including air conditioners and electrical systems. We will jump in and replace pretty much anything that suffers from normal wear and tear, if it can’t be repaired. Most of our clients use the product two to three times a year. That’s a huge difference when you compare it to the way home insurance is used once every eight years on average. Home warranties are used about twenty times in eight years.

Why do you think less than 4 percent of homeowners have a home warranty?

It comes down to awareness. The category was founded by American Home Shield in 1971 and was originally used in the real estate space, meaning that if you were buying a new home, a real estate agent would tell you about it. About ten years ago the company decided to expand its efforts, because existing homeowners were being made aware of the benefits. The growth in the consumer space is amazing. In the last two years we’ve grown this channel by 38 percent.

American Home Shield has more than 40 percent of the market share for home warranties, which is as large as your next ten competitors combined. What do you attribute to this success, and what is the company’s critical differentiator?

It’s pretty simple. We have the best coverage out there, and we’re constantly optimizing the service experience we offer our customers. A large part is also our reputation. On homewarrantyreviews.com, consumers can leave honest reviews of our product, and that is something people really appreciate and find helpful. And we deliver. We’ve paid out over $3 billion to consumers in the past ten years. We accept and pay out more than 93 percent of all claims filed, which is the highest in the nation.

When promoting a product that many are still relatively unaware of, what is your most effective marketing tactic?

What makes our marketing effective is that it hits different points; it’s not one tactic, but a mix of many, including direct marketing, digital marketing, traditional broadcast, and social media. I’ve really wanted to lead the way on the use of social media, which wasn’t really utilized before I joined the company in 2012. In a very short time, we’ve amassed about 20,000 Twitter followers, 5 million YouTube views, and 250,000 Facebook fans. Trying to get “fans” or just aiming to get “likes” doesn’t move the needle—only real engagement does. What we’ve been building over the past two and a half years is a YouTube channel that features a lot of how-to videos, teaching people how to fix broken garbage disposals or clogged air vents. We’re only interested in helping and engaging in real ways, and these videos have been very successful.

Moving forward, what are your marketing goals for the company?

My goal is to continue growing the American Home Shield brand and educating consumers so they can be more aware of the differences between home insurance and home warranties, and really understand the benefits of a home warranty. Of course, we also want to continue providing a great experience to consumers.