This is the third of a four-part look by Buckeye Dealership Consulting’s CEO Rob Fox regarding the ways independent automobile dealers and finance companies can maximize the benefits and profit opportunities that come from establishing their own reinsurance company.
Part III: Brand Management Flexibility
Having your own reinsurance program affords you the flexibility to white label products that are appropriate for you and your customers and determine the scope of terms and coverages. No longer will you have to try to fit someone else’s square peg in your circular hole.
Moreover, you can tailor your products to help drive business to your service department. This is another great way to maximize profits. Just make sure you review your forms with your attorney to ensure any tie-backs to your dealership service department are compliant.
Imagine that you’re a buy here pay here dealer who has placed a 6-month, 6,000-mile limited warranty on a vehicle you sold. That warranty covers systems like the engine, transmission, etc. What happens if your customer has a radiator fail, or the vehicle is otherwise inoperable due to a non-covered breakdown?
You know that the likelihood a BHPH consumer will keep paying for a broken vehicle decreases significantly. “Car doesn’t run, customer doesn’t pay.” By taking control of the claims process, you can keep running and the customer making payments. And, you can choose how to handle the repair without negatively affecting the cash flow of the dealership or the related finance company.
Buy here, pay here dealers will also reap the benefit of not having the dealership or finance company fund the consumer’s voluntary protection product purchase up front. With reinsurance, a pro-rated portion of the consumer’s payment is forwarded to the reinsurance trust account to provide funding for claims management. This frees up your hard-earned capital in the dealership/finance company to get more customers in their next car.
Stated simply, a dealer-owned reinsurance company, run by you, will help you minimize your losses and maintain optimal portfolio performance. Why put your destiny in someone else’s hands?