As an actuarial consulting firm, we spend a lot of time deriving the specific cost for F&I products, both from an overall perspective and down to the granular level. For example, we develop models which inform you that the cost of a wrap service contract for a Hyundai Elantra with 30,000 miles and 2.5 years of service will be $45 less than a Hyundai Elantra with 45,000 miles and 3.5 years of service. (Note, we just made up these numbers).
So we are very precise with our estimates of what drives service contract claims. However, we don’t seem to be very precise when setting the final price to the consumer