2. LICENSING AND REGULATION
ADMINISTRATORS AND OBLIGORS ARE LICENSED AND REGULATED BY THE DEPARTMENT OF INSURANCE

SELLERS MUST BE LICENSED VEHICLE DEALERS: Only businesses licensed by California's DMV as dealers are permitted to sell auto service contracts. While there are service contracts sold over the internet it may be illegal in California to do so. Service contract obligors and administrators manage subsequent claims.

REGULATION BY THE DEPARTMENT OF INSURANCE: California's Department of Insurance regulates and licenses obligors and administrators because auto service contracts have many of the similarities of standard auto insurance policies:

• OBLIGOR- The business named on the contract which is obligated to perform or pay for listed services/repairs. Obligors must have a "service contract provider" license. Obligors are regulated in the same manner as a fire and casualty insurance broker/agents but are exempt from taking the broker's examination. Obligors must also file a "specimen" of any service contract they intend to sell with the Department prior to offering it for sale to the public.
• ADMINISTRATOR- A business delegated by the obligor to handle collections/disbursement of moneys for repairs and handles adjustments of claims made by buyers. Administrators must obtain and qualify for a fire and casualty broker-agent's license.
• INSURANCE COMPANY- Obligors must have an approved insurance policy covering 100% of its service contract obligations on file with the Department. Buyers may make a claim with the insurance company in the event the obligor goes out of business or denies a claim.

SERVICE CONTRACT PROCESS: Often used car dealers only sell service contracts and their involvement ends there. When you need repairs you contact the obligor named on the service contract, bring the car to a repair shop, the obligor sends a administrators (in place of the obligor) to look at your car and authorizes payment for repairs. You pay the shop the deductible. That is when the process goes smoothly.