Do not enter into a reinsurance arrangement for your F&I products. That’s right — even though I head up a large agency, my advice is the opposite of almost everyone else. You will make more money by concentrating on F&I product sales, CSI and service department revenue.
I will expand upon these, but the elephant in the room for reinsurance is the IRS and the President. Before President Trump, the IRS instituted information submission requirements that clearly connect you and your dealership to your reinsurance company. Do you really think the collection of this information has no purpose?
You may be paying lower taxes on your “insurance” company, but do you think the IRS is happy about this? They now know about every other business you own, as well as other ventures you are involved in, because you’re required to provide this information. Do you want to spend weeks dealing with an audit because you were “randomly” selected?
In addition, we know that Trump is against foreign corporations that pay lower taxes. If your reason for reinsurance is not taxes, retro participation programs can achieve most of the same goals without the company formation costs and annual filing fees.
You must maximize the earnings available that start in your F&I office by dictating the type of sales that occur. Everyone looks at the per copy, but what about the results for your other departments? Are you selling VSCs with a disappearing deductible, driving customers back to your service department? Are you selling tire and wheel coverage? If your customer has purchased this type of coverage at your store, they are coming back. If they didn’t, chances are they won’t.
You need to find ways to maximize the service visit. Is your agent telling you about the other work performed on your tire claim repair orders? You need to know about every GAP claim within hours after it occurs because you want to call that customer.
Are you being told about VSC claims that occur at a different service location? That’s another customer call you want to make. The profits available are 300 percent of those that may come from your net premium return after claim payment in a reinsurance program. The reinsurance goal is not to pay claims. How does that affect your CSI?
Your reputation through excellent service creates customer retention and repeat customers. Work with a good agency and let them earn a profit so you can make more money now.
Cary Berman
