It seems like a no-brainer — and it is, in Europe. So why don't dealership finance & insurance managers in the U.S. sell vehicle insurance along with existing insurance products on their menus?
A licensing mandate for insurance agents who sell vehicle coverage is given as the main reason for failure to add such protection to the F&I offerings. Insurers argue that F&I managers, aren't eager to take the course and pass the state exam for the necessary license.
In addition, profit margins on vehicle insurance are often represented as “too thin” to make the product feasible for dealership F&I offices. Not to mention that established auto insurance giants such as State Farm and Liberty Mutual would encounter stiff resistance from their own agent networks if they were to provide policies for franchised dealers.
The European Union, on the other hand, has taken a more proactive posture on the idea. New insurance has to be purchased whenever a vehicle is bought — not merely transferred to an existing policy. And that new vehicle insurance can be bought at the vehicle's point of sale. Dealerships are thus able to furnish buyers with a complete insurance package on every car or truck they deliver — a customer-satisfaction service unavailable in the U.S.
The climate may be changing in the direction of 100% insurance availability at dealerships, however. Two unrelated developments this past summer support what could be an F&I windfall of major proportions: GMAC has launched a vehicle insurance package for General Motors vehicle owners, while the Virginia Automobile Dealers Assn. (VADA) has pioneered in exploring a licensing statute for F&I managers, the first state to do so.
In joining Ford Credit and BMW Financial Services as vehicle insurance facilitators (but not actual agents), GMAC Insurance attests to the viability of vehicle coverage as a productive branch of the F&I tree. Based in St. Louis, GMAC Insurance promises customers “savings of over $300 in annual premiums” on average — a claim also made by Ford Credit.
For now, in the absence of licensing courses for F&I managers, dealer personnel are not able to become sellers of vehicle insurance per se. That's where the VADA proposal could fit in, tied as it would be to state licensing regulations that cover insurance agents.
Think of it! If dealer F&I offices also could source vehicle insurance, premiums could be added to monthly loan payments, discounts could be offered for using dealership body shops for repairs (as Ford does) and commissions could flow to dealers instead of outside agents.
What's more, as European dealers have found, customers would be tied even more closely to their dealers, their brands and their insurers.
An old saying in this industry is that no customer leaves a dealer's body shop unhappy when a car is made to look like new after an accident damaged it.
Were the claim adjusted at the dealership, think of the customer satisfaction ratings accruing whether the store is in Portland, OR, or Portland, ME.
GM hasn't made much of a point of it, but its Motors Insurance did try offering vehicle coverage early in the 1980s, when former finance chief Roger Smith was chairman and CEO. The idea was discontinued after a few years due to disappointing profits and the hassles of claims adjustments.
But computers have made adjusters' lives a lot easier these days, and the larger dealer body shops provide space for adjusters to evaluate damaged vehicles on the spot. Damage evaluations, moreover, would seem to be a service that dealers could easily expand if they already were selling vehicle coverage and their body shops stood to benefit from 100% in-house business.
VADA President/Manager Don Hall is to be commended for opening up the license opportunity that could pave the way toward enhancing F&I as the true profession it is. GMAC, the oldest captive lender, is enhancing its brand and that of GM dealers by expanding into the vehicle insurance market.
That this will become a growth market is underscored by GMAC Insurance's vow to insure “most makes and models, GM or non-GM.” Now, what competitor would want GMAC or Ford Credit insuring its vehicles?
Mac Gordon is the dean of U.S. automotive writers. He can be reached at [email protected].