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F&I

Underwriting and Its Impact on Your Business

Contributing Author: Cliff Eller, Executive Vice President, Product CommercializationWith the first quarter behind you, it’s time to evaluate your progress and plan for the rest of the year. As you re-evaluate dealership processes, it’s also a good idea to step back and look at your relationship with your product administrator. Are they providing products that enhance your credibility with consumers? Are their products structured with enough reserve to handle any volume of claims no matter the market conditions?

It’s important to answer the following questions:

  • Is your product provider backed by an A.M. Best “A” Rated, fully insured underwriter?
  • How long have they been with their current underwriter?
  • Who has backed them in the past?
  • Do they adequately price their products to manage the reserve to pay claims?
  • How is their customer service in their claims department?

When partnering with a product administrator, you want to be sure that their reserves are handled properly to ensure that any unpaid claims don’t reflect back on you. One of the easiest ways to determine whether a product administrator will benefit your business is to look at the relationship with their underwriter.

First, find out their A.M. Best Rating. The rating signifies the company’s financial strength and ability to meet its ongoing insurance policy and contract obligations. Simply put, if their underwriter is a reputable company that follows through on its obligations, it’s highly probable that your product administrator is too.

However, that credit rating alone cannot convey the strength of the relationship between the product administrator and the underwriter. If the administrator has a relatively new underwriter, it’s a good idea to look into their history with others. Do they hop from one to another? With whom have they done business in the past?

Looking at how long the company has been with their current underwriter or whether they flip from one to another can tell you about the company’s viability in the market. If they can’t maintain a long-term relationship, they are most likely mishandling their reserves and putting the underwriter at greater risk. Looking at the company’s history of underwriters will display a pattern. If they’ve only worked with strong underwriters, their products are probably handled properly. If they can only attract weak underwriters, they are most likely mishandling the structure and pricing of their products.

Another area to evaluate is their reserve structure. While inexpensive products are well and good, that low cost could negatively affect the funds put in reserve to pay claims. Find out how much income from each product sold goes towards paying claims. Ask how many claims are paid each year, and take a look at their Better Business Bureau rating. If the BBB is inundated with consumer complaints about unpaid claims, that could point to a reserve issue.

One way to determine whether the reserves are handled appropriately is to find out whether their underwriter’s actuaries assist in the process of pricing the products. The actuary’s primary role in this process is to protect their company from the negative impact of having too little money to pay claims. So, they would be the most stringent about making sure the reserves are appropriately priced to accommodate the associated claims exposure.  If they sign off on product pricing and structure, that’s a good indication that the reserves are set up correctly.

It is also important to find out how the product administrator takes seasonality or market changes into account. Does the company compile it’s data to determine both long and short-term trends to refine coverage and rates? For example, more claims are filed during winter for tire and wheel policies because of worse road conditions due to potholes. The key to managing this loss ratio is to plan ahead by taking this seasonal change into consideration when first presenting the price structure.

Lastly, look at their customer service in their claims department. How fast are incoming calls answered? How quickly do they process a request? How often are calls abandoned? These statistics paint a picture of the customer experience. If customers spend most of their time waiting for their call to be picked up or for their request to be processed, you can bet that they won’t buy an F&I product from you again. Even though their claim is handled by someone else, you are essentially the face of that product administrator and the consumer will always associate that negative experience with a product you sold them.

With over 36 years of innovating consumer protection products, EFG Companies knows how to structure F&I products that increase your profit and keep enough in reserve to handle whatever the market throws our way. That’s why we are the longest-standing relationship for more than 28 years with our AM Best, “A” Rated underwriter. Find out how our consumer protection solutions and go-to-market strategies will give you the edge you need to succeed in today’s market.

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Agency Services EFG Companies

Strategic Partner? Or, Parasitic Vendor?

In this day and age, you can’t afford to underestimate the difference.

Contributing Author: Eric FifieldThe year is half-way over and you are probably re-evaluating your business to pave the way to making your year-end goals. One of the areas of high focus for every dealership and agent is their product provider. You have probably felt the burn or know someone who’s business suffered from partnering with a parasitic product provider. You know the signs:

  • No personal relationship
  • No idea what your business goals are
  • A new representative drops by every so often to drop off collateral and leave.

When evaluating current or potential product providers, it is vital to understand how those business partners act as an extension of your agency. Ask yourself the following questions:

  1. Do they listen to my input and proactively innovate new products that serve emerging demands?
  2. Are they flexible and willing to adapt with me as my business model changes?
  3. Are they willing to get directly on the front lines with me?
  4. Do they take a tiered approach to executing their programs with all customers within the agency model?
  5. What do consumers say about them according to their Better Business Bureau (BBB) score?
  6. What are their claims statistics?

Contributing Author: Paul RobersGood product providers do much more than drop off collateral at your dealerships. Rather, they understand that there are four levels of customers they must address to ensure the success of your business. First, they work hand-in-hand with you to understand your needs and tailor their service to you and your dealers based on those needs. Then they work with your dealers to understand their market challenges and address how your products meet their needs.

While dealer buy-in is important, the products won’t ever reach the customer without employee buy-in. A good product provider doesn’t stop once a dealer signs on to sell your products. Instead they work to secure employee buy-in by spending time at the dealership, training on the benefits and selling techniques of your products to people actually selling them.

Lastly, good product providers develop products, collateral, and marketing strategies that incentivize the consumer to purchase their next vehicle with your dealership partners. And, they back up product development with claims adjusters who are committed to exceeding customer expectations every day. Their claims statistics and BBB scores should demonstrate their commitment to excellence in terms of claims paid, timeliness of processing claims, and risk assessment and analysis.

With over 35 years as a world class financial service product provider and administrator, EFG Companies is committed to the continuous development of innovative products, services and go-to-market strategies that make our agents successful. Learn why agents across the US choose EFG as their administrator today.