As with most auto dealerships, your service and parts department is possibly your company's lifeblood. In a previous report, the National Dealership Association revealed that service and parts accounted for 46% of the gross profits at the average dealership. If your Financial and Insurance (F&I) Department isn't a close second as far as profits are concerned, there is no better time to consider Dealer Reinsurance than now.
There are two main reasons why many dealers do not start their own Reinsurance companies? One, they are fearful of the risks, and two, they are not familiar with the benefits of this venture. If you are considering becoming a dealer-owned Reinsurance company and you are not familiar with the basics, you are not too late. We have prepared this guide to help understand what dealer-owned Reinsurance is and what its benefits are. First things first:
What is Dealer Reinsurance?
As the dealership owner, you probably work with insurance companies whose customers pay monthly premiums. Should those customers file a claim, the insurance companies are obligated to process those claims.
Therefore, Dealer Reinsurance is a mechanism that transfers the risk from an insurance company to a Reinsurance company. It allows dealers to share in the underwriting profit and investment income on the Financial and Insurance products they sell.
The biggest misconception about Reinsurance is that it costs a lot of money or that your dealership must be big to get started. Neither is true. At Vanguard Dealer Services, we understand that every dealership has a unique situation. That's why we offer tailor-fit dealer solutions that suit each dealership.
So, how does dealership insurance help your dealership? Well, the following are the benefits of becoming a dealer-owned Reinsurance company:
- It ensures continuous cash flow and profit maximization
Insurance companies and third-party warranty companies profit from premium reserves that are left unused after claims are paid out. When your dealership becomes a reinsurance company, you get to capture that profit instead. Therefore, Dealer Reinsurance is not only another source of income that can help to grow your dealership, but it is also a new profit creation source that can help you expand your profit margins.
- It offers flexibility in customizing terms and policies
With Dealer Reinsurance, there are always high possibilities for full accounting, reporting, and funding premium accounts every week. When you're able to customize the terms and the coverage, you have complete management of your company, which can help in the maximization of the profit opportunities.
- It helps in improving customer satisfaction
As the owner of the Dealer-owned Reinsurance company, you're in control of the warranty and insurance claims. You're also in control of the overall experience for your esteemed customers. If you manage to keep your customers happy, your business will maintain a loyal clientele, thus boost growth and expansion opportunities.
Interested in the Benefits of Reinsurance?
In the case of Dealer Reinsurance, the benefits by far outweigh the risks for most dealers. This new venture can turn out to be another source of income that can boost the growth your business growth. You can use it to open new locations, acquire other dealerships, invest in real estate, or even add to your retirement wealth.
Is your dealership ready to transform into a Dealer-owned Reinsurance Company? If you don't know how to make the transition, Vanguard Dealer Services can help. We have helped many dealerships become dealer-owned reinsurance companies. We'll be happy to assist you too.
Call us at (973) 575-7171 today so you can learn everything you need to know about becoming a Dealer-Owned Reinsurance Company.