Reinsurance sounds like a good technical term. However, this technical term can be among the best things you do for your dealership and customers. Reinsurance is an excellent strategy for insulating your dealership from volatility and protecting your bottom line.
Also, it is a wealth creation opportunity for your business. You may be wondering what reinsurance is? What benefits does it offer my dealership? How can I use it for my company's advantage? Continue reading to get answers to all these questions.
What is Reinsurance?
Presently, you may be working with insurance providers that serve your customers. The insurance providers enter into contracts with your customers. Your customers agree to pay monthly premiums while the insurance provider provides coverage to the customers. In the event of a claim, the insurance company takes responsibility.
Dealership reinsurance puts you in the driver's seat, and the process falls into your hands. Rather than customers entering into contracts with third-party insurance companies and filing claims with them, they do it with you. Reinsurance transfers risk from third-party insurance companies to your dealership's reinsurance company.
With dealer reinsurance, you share the underwriting profit and investment income of the products you offer. You can use reinsurance for powertrain contracts, tire and wheel protection, and vehicle service contracts.
Benefits of Reinsurance for Dealerships
1. Stronger Gross Profits
The auto industry is becoming increasingly competitive. It can be difficult to generate a decent profit by selling new and used cars. Fortunately, reinsurance helps you make an extra buck so that you have money coming in, even when profits are down. You get increased profit from investment income, taxation, and underwriting profit. Reinsurance also has a good return on investment, which increases your profitability substantially.
2. Enhance Customer Satisfaction
Without reinsurance, you rely on third-party vehicle service warranties to meet your customers' service needs. When a customer files a claim, the warranty company handles it. In the event a claim is denied, the customer holds you responsible and takes his frustration on your dealership. Luckily, with reinsurance, you don't have to deal with third-party insurance providers. You take charge of the warranty and insurance claims.
Reinsurances gives you ultimate control, and you can provide world-class service to your customers. You decide on how claims and warranties are handled and hence boost the experience of your customers. The outcome is increased customer satisfaction and experience with your dealership.
3. Offer a Wealth Creation Source
With reinsurance, dealerships can enjoy premiums from vehicle service agreements and aftermarket insurance. You can use the funds accumulated for business expansion, such as acquiring new dealerships and investment in real estate.
Also, reinsurance offers a protective feature in the event of an economic downturn. In the last recession, dealerships that had reinsurance were more protected than those that did not. It is good to note that reinsurance is not a quick fix. Do not wait for a recession to consider reinsurance. Currently, when the auto industry is thriving is a good time to invest in reinsurance in readiness for a bad day.
Is Reinsurance for Your Dealership Worth it?
With the benefits mentioned above, reinsurance for your dealership is worth it. Reinsurance increases your profitability while enhancing customer satisfaction. It also acts as a source of income to protect and grow your organization.
If you are considering reinsurance for your dealership, ensure you do your homework well. Choose a reinsurance provider that meets your needs and complies with the reinsurance industry's rules and regulations. When in doubt, consult a professional with a good understanding of the reinsurance sector. Invest in dealership reinsurance today and say hello to greater profits in the long run.