Claim rejected!

Rejected claim! Disappointed with this warranty. What are we paying for. I Have had my BMW X3 going into 4x4 mode with all warning lights coming up. Sent it in for a repair, after investigation, it was deemed that the internal gear in the transfer box was damaged. Claim submitted to Motormend but it was rejected with the response that its not an internal component. It is an internal component and forms part of the transfer box which is what is covered in the warranty! What are you actually selling to the consumers? How can you reject this claim? What a waste of time and money spent paying premiums over the years.