Category: F&I

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Business Growth F&I

Looking for a Product Administrator? How are Their Reserves?

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 seek to continually improve your auto lending processes, and determine new avenues of profit, you are probably conducting due diligence in determining whether providing consumer protection products with your loans would benefit your institution. In this process, it’s important to ensure that any product administrator with which you may choose to do business will enhance your credibility with dealerships and consumers. The best way to determine this is to start by looking at their reserves and whether their products are structured to handle any volume of claims no matter the market conditions.

In your review, keep the following questions in mind:

  • Is the product provider backed by an A.M. Best “A” Rated, underwriter?
  • How long have they been with their current underwriter?
  • 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 adequate in order to ensure that your customer’s claims are handled for the duration of the contract. One of the easiest ways to determine whether a product administrator will benefit your business is to look at their relationship with their underwriter.

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

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. Why did they make the change?

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 may be inadequately reserved, 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, the chances exist that they could be mishandling the structure and pricing of their products.

Another area to evaluate is their reserve structure. While inexpensive products are attractive initially, 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 potential claims issue that adversely affects your customer.

One way to determine whether the reserves are handled appropriately is to find out how the 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.

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 their request to be processed, you can bet that they will associate that bad experience with both your loan and the dealership who sold it. This obviously negatively affects the customer experience. Even though their claim is adjudicated by a third party expert, which is a positive, your dealership partners and your brand are essentially the face of that product administrator.

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’ve maintained one relationship with an AM Best A rated insurer as our underwriter since our inception. 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.

Categories
Business Growth F&I

Are You Relevant in the Market?

CalloutThe news is in! According to the latest “State of the Automotive Finance Market Report” from Experian Automotive, vehicle loan delinquencies are down, nonprime, subprime and deep subprime lending volume is up, and we’ve reached a record level of open loan balances.

Everyone is looking to reap the benefits of a healthy market. However, while consumers are relying more heavily on financing and continuing to make their monthly auto loan payments a priority, they are still highly value conscious. With a healthy market, you might think this doesn’t matter as much. Even with increased competition, there are plenty of consumers getting back in the car market. With a solid number of closed loans each month, there’s nothing to worry about, right?

Eric Fruithandler, Senior Sales Executive, Specialty ChannelBut, what if you could do more? What if you could blow that increased competition out of the water? The good news is you can by focusing on what the American consumer wants – value. The value-driven consumer from the recession didn’t go away once they had more money in their pockets. Instead, much like the consumers after the Great Depression, they kept their new outlook and their money. Now, when consumers walk into a dealership, they aren’t just looking for a new car, they are looking for a new experience that puts their needs first.

Now consider your loans and where they fit into this picture.

  • Do your loans reflect the value proposition of your dealership partners?
  • Do F&I managers understand the benefits your loan poses for their customers?
  • Is the loan funding process simple and efficient?
  • After loan closing, do customer relationships foster repeat business and referrals?

The indirect loans that sell the best aren’t necessarily the ones with the lowest rate anymore. Instead, they are the loans that make an F&I manager’s job easier by setting them up with a value proposition. This value proposition starts with their experience securing the loan and ends with the loan’s benefits. Think about the customer experience after loan closing, could that experience be turned into a value proposition?

Put yourself in the shoes of the consumer. What’s important to you when shopping for a loan?

  • Ease of making payments
  • The ability to view quickly your loan balance
  • When calling with a concern, the ability to speak with a real person
  • Mobile banking

While each of these things might seem standard, you would be surprised how many consumers don’t even know how to make their first payment and end up starting their auto loan experience off on a bad foot. With this information in hand, the F&I manager can more easily demonstrate their commitment to the customer as they present a loan with the confidence that the customer will be taken care of.

Beyond what you already do, there is also significant opportunity to relate your loan to dealership needs and customer concerns. F&I managers can tell you, it is not easy trying to sell consumer protection products by themselves. Too many customers walk in with pre-conceived notions about the legitimacy of the products sold in the F&I office. One of the easiest ways to you can help them overcome this setback is with complimentary F&I products, which put the F&I manager in a positive position with their customers, enabling them to increase product penetration with upgrades.

While these products allow consumers to avoid unexpected expenses that may inhibit their ability to make a car payment, they also provide you with increased income potential per loan funded. By offering complimentary consumer protection products, you have the opportunity to increase the relevancy of your loan to dealerships and consumers, thereby increasing the number of your loans and your bottom line.

At EFG, we know how to pair the right mix of products with your loans to achieve maximum success. But beyond product development and administration, we also act as an extension of our client’s business to ensure their relevancy in the market.

Contact us today to find out your loan volume can exceed expectations.

Categories
F&I

Are You Prepared for a Buyers’ Market?

Contributing Author: Brien JoyceA few years ago, you may have been one of the few lenders in your area aggressively offering subprime loans. While the automotive market was struggling, you had the advantage of being one of the only subprime options available to those consumers who were in the market to buy. With limited supply, you had better opportunity to increase your profit margins with minimal effort.

Now, the tables have turned. The subprime market expanded exponentially in 2013. According to Automotive News, executives at General Motors stated that in December, subprime accounted for 7.5 percent of their sales volume.

As more big banks and captives enter the ever-expanding subprime market, you no longer have the same market advantage with Dealers. In essence, we’ve left the seller’s market and entered a buyer’s market. With so many available options, consumers have a better opportunity to shop for the best rate and terms. Naturally, smaller subprime lenders will have a harder time competing on rate alone with larger institutions.

Whether direct or indirect, it’s time to move past rate-only marketing strategies and compete on the value of your loan or your institution. Dealerships and consumers alike are more likely to work with lenders that make their lives easier. For dealerships, this means a quick turn-around on loan approvals, availability during dealership hours (not just bank hours), and providing a loan that consumers will find valuable.

It is actually possible to succeed at captivating both consumer and dealer audiences at the same time. Loans offering complimentary, short term or limited F&I products that reflect a dealer’s consumer base position them to effectively increase profit and customer retention. Consumers will be more confident with doing business with the dealership and in their financial future. In addition these loans may benefit you by helping to mitigate potential loss.

For example, if a customer experiences a mechanical breakdown within the first six months after purchasing a vehicle, they could potentially struggle with the financial burden of paying for both extensive repairs and their monthly auto loan payment. With a six-month complimentary vehicle limited vehicle service contract, that burden could be significantly reduced, allowing them to repair their vehicle without putting a significant strain on their finances and affecting their ability to make their payment on their car loan.

The complimentary product also makes it an easier conversation for the dealership up to give their customers the option to upgrade to potentially the entire length of the loan. This protects you, the customer, and significantly increases dealership profitability.

To determine your value to your dealership partners, conduct an internal audit of your loan closing procedures with these questions in mind:

  • How quickly do we respond when the dealership submits an application?
  • Are we always available when an F&I manager needs us?
  • Are we courteous and professional when working with a dealership?
  • Do we provide solutions to help our dealership partners succeed?
  • Do our loans give the dealership additional credibility with their customer base?

In this highly competitive market, your value proposition is your differentiator. By focusing on enhancing the value of your loans through good customer service and targeted F&I products, you can significantly increase efficiencies for both for you and your dealership partners.

With over 36 years in innovating and implementing proven go-to-market strategies in the dealership space, EFG Companies understands the importance of your value proposition. Which is why EFG structures its products and services to not only provide value to you, but also dealerships and the end-consumer. Our unmatched client-engagement model goes well beyond simple product innovation to mitigating liability through superior claims processes, and continuous training and follow-up.

Find out how EFG can help you break through the competition. Contact us today.