Embedding an insurance marketplace into a dealership’s new-car sales process can lead to more income for dealerships, consultants and vendors say. Yet taking the marketplace approach a step further into the sale of F&I products is not likely to boost the bottom line.
"I would recommend that dealerships use some kind of insurance platform, but I would never recommend they use an F&I platform because their product penetration as well as profit per product sold will diminish if not evaporate," F&I performance consultant Max Zanan tells Wards.
A marketplace is not a lead generator. Rather, it offers a consumer a selection of goods, in this case auto insurance policies, which the consumer then buys directly through the marketplace.
Polly is an example of an online insurance marketplace. During the sales process, a dealership customer using a mobile phone app can view insurance quotes from multiple companies, choose a policy and purchase it from Polly on the spot.
A few dealerships have established license insurance agencies and receive recurring insurance commissions from policies sold through his company’s marketplace, Polly president and COO Wayne Pastore tells Wards. A more common approach is for Polly to pay for insurance referrals, he adds.
"This not only provides another source of income for the dealership, but it also elevates the customer car shopping experience by embedding insurance directly into the buying process, where car shoppers find it most valuable," says Pastore.
Other "marketplaces" take a different approach. Salty, owned by CDK Global, also offers an embedded insurance purchase experience. But rather than showing multiple insurance carrier options, Salty uses artificial intelligence to determine the most appropriate policy for a consumer. It can then be purchased online from the provider.
Salty boosts a dealership’s bottom line by increasing customer satisfaction, says Anu Roberts, senior director-product marketing at CDK Global/Salty.
"As with other retail purchases, consumers are looking to do business all in one place," she says. "Dealers who offer this value-added benefit have seen their CSI scores, revenue and customer retention increase and consumer trust strengthened."
The F&I office is a significant profit center for dealerships. For example, publicly listed dealership group AutoNation made more than $2,600 F&I gross profit per vehicle retailed in the first quarter of 2022.
Only licensed insurance agencies can sell insurance directly to consumers. But dealerships can and do directly sell a wide variety of both dealership-branded and third-party products through the F&I office. They range from GAP coverage to tire and wheel protection to service contracts.
Why not sell these additional F&I products from a digital marketplace? For one, they are confusing and unfamiliar. A Reynolds and Reynolds survey found 72% of those surveyed were somewhat to not at all familiar with F&I products. If shopping online, 40% said it was extremely important to speak with someone for more information.
Also, people are optimistic by nature, says consultant Zanan. "It is really difficult for the person to put themselves in the position where they are going to imagine the car they just bought is going to break down or they are going to get into a car crash," he says.
But a marketplace selling straightforward auto insurance can help sell F&I products. People dislike spending time in an F&I office. In the Reynolds and Reynolds survey, a whopping 45% thought evaluating and selecting F&I products at a dealership should take less than 20 minutes.
That’s where using an insurance marketplace can help.
"People hate to sit in an F&I office," says Zanan. "But if the first thing you do is (show a customer how to) save money, perspective changes immediately."
He says that a smart finance manager will then sell the customer F&I products using the savings.
In fact, that often occurs, according to Pastore. "Polly dealer data shows a 44% increase in gross back-end deals in which the customer bought insurance from Polly," he says.