IN TALKING TO FLY ROD manufacturers around the industry, I hear the same complaint repeated again and again: the unconditional lifetime warranty is killing us, you say. Besides writing about fly fishing gear, my other job is being an insurance lawyer. It hit me one day that a lot of rodmakers find themselves in situations similar to those of some of my clients. Now I know rodmakers vary greatly in how they manufacture and market their products. My suggestions certainly won't apply equally to everyone. But I hope that there's enough commonality here to stir some thought.

See, it occurred to me that unconditional warranties are really like an insurance policy. In effect, rodmakers are insuring the rod against breakage. In exchange for acting like an insurer, you increase the price of your rods up front—that is, you charge a "premium"—which you set aside to cover the future costs of repairs. (In the insurance world, they call the money you set aside a "reserve.")

The trouble is, the market kept most of you from being able to set proper reserves, because you wanted to provide the best price to customers. Since you also must "pay every claim," or repair practically every rod that comes in the door under an unconditional warranty, repair costs have historically been undervalued up front. What's worse, repair departments can fall behind, because you need your craftsmen making new rods at a profit, not fixing old ones at a loss. Unfortunately, being behind causes customer dissatisfaction, which eats further into profits.

I think I might have a solution: what if you got out of the warranty business altogether?

You can probably already hear the customer complaints: "Quit offering warranties?! Who will fix my rod when it breaks?!" That's fair; obviously the market shows that anglers want to buy protection—insurance—against rod breakage. The thing is, most anglers would probably be a lot better off buying that protection from an actual insurance company than from a rodmaker.

Say the rodmakers started offering rods without warranties (at a price discount). You could still offer some rods at higher prices with the warranty, too, but this would at least give the customer an option. When a customer bought a warranty-less rod, he'd probably still want to buy protection for it. Let's say he saves $75 off of what was previously a $675 fly rod. He's got $75 to spend on insurance to cover the rod. Where does he turn?

Easy: to his insurance agent. Every major auto and home insurer offers something usually called a "personal articles policy." The personal articles policy is meant to insure small items of property against breakage—and also against loss or theft. In other words, these policies give the customer extra protection: currently, if a rod is lost or stolen, the customer's just out a fly rod. With a personal articles policy, however, that customer would be able to turn in a claim and get a new rod. Insurers assume that people will try to protect their stuff if at all possible. Further, they usually want to oblige customers who buy other, bigger policies from them. (Fly rods, when compared to homes and cars, are truly small potatoes).

Personal articles policies usually carry no deductible. In the current arrangement, rodmakers have to charge a "handling fee" of $25-75 for repairs. (Any insurance man would recognize that as a de facto deductible.) Insurance companies will often offer existing customers a very attractive rate on personal articles policies if they have other business with the insurer. Based on my personal experience, personal articles policies usually provide about $1,000 in coverage for around $1.50 to $2.00 a month.

Let's take the example of that now-$600 fly rod again. Customers could either (a) purchase a warranty from the rodmaker for $75, or (b) buy a personal articles policy from their insurance agent for the same $75. The math works out that a customer would get about three and a half to five years of coverage for his $75. Since many anglers replace rods every three to five years, this is a financial push. Moreover, for his $75, your customer would also be covered against loss or theft. Since the customer would also save the cost of the deductible if he did break a rod, his cost of ownership of the fly rod plus his warranty plus his deductible would almost certainly be lower for the first several years.

How do you get customers to deal with the dreaded insurance companies instead of simply buying warranties? First, they need to be educated. Insurance against loss instead of just breakage is nothing to shake a stick at; most people would immediately see why this is a good thing to have. Second, many insurance companies might be willing to work with you to set up exclusive deals. In other industries, such as with hard contact lenses back in the 1980s, the customer would often buy an insurance contract over the counter when he purchased his expensive, losable/breakable product. Some of my insurance clients still sell coverage like that. The customer could simply set everything up when he buys his rod, and even pay for several years of insurance in advance (for the same amount he would pay for the warranty).

If this new system was in place, manufacturers would no longer have to eat every warranty repair claim. There'd be no more need to guesstimate how many rods might come back broken; the insurance companies would handle that. Meanwhile, the customer gets insured against loss or theft as well as breakage, and would most likely come out ahead on price. Finally, if a rod did get broken, the manufacturers would get paid their actual costs to fix the rod (instead of eating those costs).

Right now, everybody pays the same amount for rod warranties based on the average cost of repairs. This means the guy who never breaks a rod is covering some of the costs for the guy who breaks many rods. It's a backwards system: the careful, responsible angler is being asked to cover for the klutz. I know this has bothered many of you from the start of the lifetime warranty era.

What are the potential downsides of getting insurance instead of a warranty? There's the possibility that a habitually clumsy rod-breaker might get his coverage revoked. Most insurance companies are not going to kick someone off the program for one or two or even three claims in a year. But the guy who snaps boatloads of rods will have an incentive to be a little more careful. Further, insurance companies have some protection that rodmakers don't: if someone intentionally breaks a rod and files a claim, he can be prosecuted for insurance fraud.

Admittedly, there's the possibility that some insurance companies might charge a deductible, or refuse to pay for "wear and tear" breakage. That's the beauty of the capitalist system: if one insurance company is not willing to write the coverage, the customer can decide to take his money to someone who will. Currently, I have insured my rods with personal articles policies just to get the coverage against loss or theft, and I have never had any problems getting a claim paid.

Many people—(careful) customers and rodmakers alike—think the system we're in now is broken. Rod repairs are not just eating up margins, they are actually making it unprofitable to make fly rods at some companies. Customers really aren't getting the best deal they could. The market is inefficient, meaning the careful customers are having to cover for the klutzes. Most importantly, no one has any options; you automatically get a warranty with every rod, but you also automatically pay for it. It might be time to "deregulate" the fly rod warranty business and give everyone the chance to spend their money in the way that works best for themselves. In all probability, manufacturers would benefit, and customers would too.