Insurance Companies Make Billions Off Car Dealers Each Year: How Can Dealers Keep That “Food” On Their Own Plates?
When a dealer sells a car, they have to report that sale to the DMV and, in many states, (according to a New York dealer friend of mine), the dealer has only four days to let the state know.
When a dealer sells a car, they have to report that sale to the DMV and, in many states, (according to a New York dealer friend of mine), the dealer has only four days to let the state know. There are many important requirements that must be fulfilled before the transaction can be declared complete and the dealer can relieve themselves of the financial responsibility of that sold unit.
This is where the insurance companies set up shop — just on the other side of the sale. State law requires dealers to report information about each transaction, and companies seeking additional up-sell opportunities can easily purchase that information. One dealer even told me that he has customers calling his dealership back to cancel back-end contracts, stating that they received a phone call from a competing company offering additional services at the same rate. I’m not really sure what image comes to mind when you experience that, but the photo to the right is the one the dealer gave me.
How then can dealers capture that revenue for themselves? If you’ve read any of my articles (October and November 2018 issues), you know I’ve written about in-dealership insurance agencies. Owning your own insurance agency inside your dealership creates an umbilical cord to the customer through a dealer-owned book of business that could potentially be worth more than the dealership itself within just a few short years.
The dealer can now possess the same access to an additional revenue stream (commissions on new and renewal policies) that can add 10-15 percent in compounding and recurring net profit just from the dealership’s existing customer base. With an in-dealership agency in place, the dealer will have an actual reason to follow up with their customers every six or 12 months to renew/adjust a policy in addition to additional purchase opportunities for a new car or other products/services.
Dealers will be able to notify customers of potential rate increases, and offer them lower rates from the different carriers they represent. This will enable the dealer to keep the customer as an insurance client regardless of which insurance carrier they choose (provided the dealer agency is appointed by the carrier). Dealers can create better customer loyalty and customer service ratings for solving another customer’s problem. They can better utilize staff and reduce employee downtime and turnover by creating additional revenue streams for their employees. Dealers will be better able to ensure that no car sales are lost because the customer was unable to secure proper insurance.
Installing an in-dealership agency gives the dealer’s customer a convenient, familiar and friendly environment where they can pay premiums on policies they hold just by visiting the dealership’s on-site agency. These services also give the customer peace of mind should the need arise for them to file a claim simply by calling the dealership and asking to speak to their insurance specialist.
Dealers will also have a new sale opportunity in the event that a customer gets into an accident. The dealership agency is required to receive an alert immediately after the customer is in an accident, known as “First Notice of Loss,” which will give the dealership the first option to provide the towing for the damaged or immobile vehicle and provide new purchase options with familiar dealership personnel and on-site inventory.
This will also expedite the claims process and reduce potential litigation issues due to the speed and efficiency in which the customer is presented with a settlement offer while simultaneously being allocated a replacement vehicle.