Merlinos & Associates has a long history of providing warranty, service contract, and credit product related consulting work to its insurance regulatory, insurance company, and vehicle manufacturing clients. For more than 20 years, we have consulted to insurance regulators from both a pricing (collateral protection, mortgage fire, credit) and insurer solvency (warranty, service contract, contract liability) perspective.   Our regulatory pricing work has involved review of overall industry pricing levels for particular states, as well as review of individual company rate filings and rate structures.  The solvency work includes financial examination of unearned premium and claim reserves of insurance carriers as well as target examinations of troubled insurance companies.   


Merlinos has also worked with the NAIC working groups on model laws and regulations related to credit property and the reporting of credit experience in statutory filings. Our credit-related consulting services for insurance companies includes development of earnings curves to properly match revenues and expenses on longer duration contracts, as well as, traditional pricing, and reserving.   Clients include Ohio Indemnity Insurance Company, Kubota Insurance Company, and Chrysler Group.  Our work for these clients includes:

  • Developed Credit Life insurance product.
  • Reviewed state regulations for maximum rates in each jurisdiction and worked with company on development of rates.
  • Analyzed warranty products and filing products with regulators.
  • Reviewed company experience for warranty coverage and reviewed earnings patterns and emergence of claims over contract terms.

Merlinos also provides advisory services to the financial arm of one of the largest auto manufacturers.  This ongoing work relates to assistance with developing and implementing the appropriate algorithms for return of premiums to policyholders on all their point-of-sale and credit-related products (Credit Life/Health, Guaranteed Auto Protection, Vehicle Service Agreements, and Prepaid Maintenance Plans). We also provide assistance to audit firms with regard to revenue recognition and the corresponding recording of liabilities for warranty products.  For example, Merlinos has assisted Grant Thornton in its audit of a large termite warranty provider.   Our review resulted in a significant change in the accrual accounting to better match revenue with expenses.  During this engagement we also:

  • Developed models to process refunds on cancelled contracts and reposed vehicle.
  • Analyzed data and refund methods for credit life, accident health, and vehicle warranty & service contracts.
  • Reviewed state regulations for refund methods on each product.
  • Reviewed contract specific data in development of the models.


Our consultants have extensive experience reviewing earnings pattern on automobile warranty service contracts and other multi-year warranty and insurance products.  This work has been performed for insurance company clients, regulatory clients, audit firms, and others.  Some examples include:


  • Reviewing earnings patterns for two national auto service contract programs.
  • Appointed Actuary reviewing multi-year loan insurance product earnings patterns.
  • Reviewing earnings patterns on multi-year dual interest property damage products.
  • Managing product development and approval process for extended warranty products, including vehicle service contracts, tire-and-wheel protection, and guaranteed asset protection products coverage.


  • Reviewing service contract earnings curves to provide an opinion on the curve lengths, timing, and reasonability for the financial arm of one of the world’s largest automobile manufacturers.
  • Reviewing methods of revenue recognition and corresponding recording of claim liabilities as part of national consulting firm’s audit of a large termite warranty provider.


  • On behalf of a state insurance department, reviewing earnings patterns on auto service contracts as part of several financial examinations of an insurance company where auto service contracts were a major line of insurance product.
  • On behalf of a state insurance department, participating in a target examination of insurance company selling contractual liability policies guaranteeing performance of service contract providers. Included evaluation of revenue recognition of underlying service contracts.


Peter Scourtis