LED Lighting Warranties – a new approach to help the market

LED Lighting Warranties – a new approach to help the market

Published on May 14th, 2018 (Gareth Jones)

The introduction of LEDs into the Lighting market has completely disrupted the sector with huge changes in the supply chain and the range of products and speed of innovation in this otherwise slow growing market sector.

New technologies in the form of LEDs, drivers, optics, luminaire, module and lamp form factors create a potential for differentiation which was previously very difficult with the traditional glass and glass “bulbs” . Introduce the aspects associated with SMART lighting and IoT connectivity and we have many other elements concerning product performance and new issues such as data security and protection from cyber attack.

The differentiation and diverse supply chain has created many problems for end users and specifiers to understand how to be confident in the data supplied to them by the manufacturer. Trust is enabled through reliance on the larger more established brands in the market but this can lead to the smaller more innovative manufacturers with a problem in overcoming the gap in trust. Many smaller companies spend a lot of time and money to educate the market about the steps they take to ensure compliance and product reliability.

In Europe the CE mark does not provide the necessary confidence that the product complies with all the requirements necessary to meet the requirements for safety, EMC, ecodesign and RoHS regulations. This is not because the CE marking scheme is not thorough and comprehensive – on the contrary it is an exemplar used to demonstrate a good compliance scheme throughout the world. However, where it lacks strength is the reliance on self-certification allowing products to reach the market without any scrutiny from external independent and accredited third-parties. With the current race to reduce prices of LED lighting products in the marketplace some manufacturers cut corners and do not perform the required design and testing to ensure that the product meets the essential requirements to meet safety. I would like to point out that I do not mean to tarnish all manufacturers with this and welcome comments from those that do the right thing – but it is a fact that lots of manufacturers do not perform the necessary steps and this cannot be a good thing for the industry. Trade associations can only go so far to discuss these matters as they fear a backlash from their members (owners) and have no wish to damage the profile of their industry.

Self-Certification leads to poor compliance

The content of the technical file is the key way in which the demonstration of compliance is established. A study by the International Federation of of Inspection Agencies (IFIA) looked at the end market compliance when a self-certification scheme was used compared to a scheme when an accredited inspection agency was involved in ensuring that the technical file met the compliance requirements. The study showed that when an independent accredited agency was involved then only 1 safety critical issue out of 120 samples was found. However, when self-certification was relied upon then 38 instances of safety critical issued out of 247 products studied was encountered. Indeed, in this study 78{4b479c29e7e75144eee93d961debc6ccd38b87e48532d5f844d44a1d040b5be0} of the products inspected that had been brought to market via the self-certification route had some form of non-compliance. This a startling and concerning result as graphically shown below:

IFIA is concerned that the current CE marking system does not provide adequate information and protection to consumers. It commonly leads to the misconception among consumers that products have been tested for safety purposes before being released onto the market.

In reality CE marking only requires manufacturers to declare that a product is in conformity with EU law or standards. Additionally, because the CE mark has no owner, there is no entity to pursue in instances of fraudulent use by manufacturers or suppliers of products, (some of which may be counterfeit) bearing CE marks. As a result, counterfeited CE marking on products is a fact of life in Europe.

Our lab (LUX-TSI) in the UK has in the past conducted numerous tests of products bought from the shelves of retailers and found similar issues with non-compliance.

So, product compliance is a problem in the industry – this can manifest itself in significant legal issues when things go wrong.

There also exists another problem and that concerns the reliability of LED lighting products – how long they will last – how they will fail and who will take care of this when products do fail. The issue of product warranties has been discussed many times for example read here.

Product Warranties

Manufacturers supporting product warranty leads to issues due to large unknown factors in exactly how long the product will last when new technology is used and this leads to the need for them to over-provision for loss in their balance sheet accounting (future liability due to product replacement). This provision can overly restrict the net worth in the balance sheet which can impeded a company’s ability to raise funds or grow the business.

Indeed for some streetlighting contracts and other tenders to public sector organisations cash has to be transferred into escrow accounts which can no longer be utilised by the manufacturer with obvious cashflow and working capital constraints.

End users also have issues with warranties supplied by smaller early stage companies (who may well have excellent products due to speed of innovation and adoption of new technologies) where they may be concerned whether the warranty could be upheld if the manufacturer was no longer trading i.e. ceases to exist.

We believe that the essential attributes of a product warranty are :

  1. Clear terms and conditions about what is covered and what is not;
  2. Clear information about how claims can be handled for most eventualities ;
  3. Clear understanding what constitutes proper use and what does not for claims to be made.

A new product has emerged on the market called Luxsure. This introduces insurance backing for the manufacturer’s warranty utilising certain underwriters at Lloyds of London to cover the risk associated with the product warranty.

Luxsure – How it works

LED lighting product reliability is a complex interplay of mechanical, chemical, environmental, thermal, optical and electrical characteristics in a system. LED lighting products generally consist of a :

  • Lamp or Luminaire housing and connection to the built environment;
  • LED module(s);
  • Electronic driver and connection to the mains;
  • Thermal management of heat in LED and driver;
  • Wiring and connectors;
  • Optical System(s);
  • Seals and environmental protection;
  • Wiring from external to internal.

The Luxsure programme can be defined as follows:

Firstly, products to be covered must be CE marked (this is a minimum requirement) and the technical file should be established using data which can prove proper due dilligence of the various technical e.g. competent internal labs or accredited external labs to provide the test reports;

Secondly, a proprietary assessment scheme is applied to the product(s) by Luxsure using its approved lab LUX-TSI, which provides an assessment of the predicted reliability of the product when used under normal conditions (which are provided by the manufacturer) and over a timescale aligned with the product warranty term. Any date provided by the manufacturer can be used where applicable and allowable to keep costs of any further testing to a minimum;

Thirdly, the manufacture’s control of suppliers and manufacturing quality is used as part of the quality review process and changes to essential quality or safety reliable components are to be communicated to Luxsure during the period of cover;

Fourthly, the manufacture specifies the cost of replacement and what elements will be included e.g. labour, replacement, repair etc.

From the above work a reliability and quality score is provided which is used by the underwriter to predict a premium upon which the insurance policy can be used to support the manufacturers extended product warranty. If approved the policy can be issued to run alongside the warranty period. The first year of use is covered by the manufacturer and then the insurance product underwrites the risk of subsequent years.

The advantages of this process are as follows :

  1. Liabilities currently taken up as provisions on the manufacturers balance sheet move off into a predictable cost in the P&L with the comfort of assurance that product failures (up to a certain amount) are covered along with any labour charges for the removal and re-installation process (subject to a policy that includes labour provisions);
  2. Once insurance has been taken out other cover can be provided such as serial loss, continuation of cover in the event of manufacturer ceasing to trade and other elements such as cyber attack;
  3. As with all insurance schemes once failure rates become better known then it is highly likely that premiums will decrease with time using the well-known no-claims discount mechanisms.
  4. Claims are handled by product experts who can quickly assess the issues and make decisions with confidence. New technologies will also be introduced to track the items under cover and measure temperature to determine that the product has not exceeded certain component temperatures in use i.e. not been used inappropriately.
  5. The assessment process itself can reveal (confidentially) to the manufacturer certain issues concerning their products which affect reliability and due to the partnership offering within LUX-IEC (product and compliance consultancy) they can obtain knowledgeable independent support to help improve product performance and reliability.

So, it is encouraging to see this new product being offered into the lighting market to help manufactures grow their business and provide assurance for the end users that product failures can be handled quickly and effectively as they occur, and even if the manufacturer ceases to trade product warranties can be continued (subject to the appropriate insurance policy being in place)

Come and talk to us for further information (Email info@luxsure.co.uk or call +44 1656 864618)

Light is beautiful and its measurement needs care and attention to interpret such beauty