How to find the right dealer reinsurance provider and profit-sharing program that works for the Dealer’s best interest to generate wealth and financial security.
One of the most valuable assets a Dealer has is often neglected and misunderstood. Running an effectively managed reinsurance program with the right provider generates security and wealth, while allowing the Dealer to stay in control. Analyzing your current reinsurance program or shopping for a new one is no easy task. However, carrying on with no dealer reinsurance program or a poor reinsurance program can be costly to a Dealer’s long-term wealth.
Many Dealers assume all reinsurance is the same and therefore look for low administrative costs alone. After decades of experience in the dealership and on the administrative side, we can tell you – all reinsurance is not created equal.
Here are the key components Dealers should look for when assessing a dealer reinsurance program or looking for a new reinsurance provider to build long-term wealth.
1. Dealer reinsurance with control and flexibility
Have you been offered the option to own your own reinsurance company? Dealer owned profit sharing programs allow you to build substantial wealth and security with access to legal tax advantages. With the right program, this means you would get:
- 100% of underwriting profits
- Keep 100% of underwriting investment profits
- Fully disclosed provider fee
There is a substantial amount of money you could be leaving on the table if you do not own your own reinsurance company. Furthermore, if you receive 100% of underwriting and investment profits the money works for your wealth development rather than someone else’s.
2. Investment income opportunities with dealer reinsurance program
Does your current provider give you the possibility to create your own investment strategy without difficult restrictions? Guidelines are expected, but your provider should be generous with these guidelines and work to help you build your wealth. Additionally, this should include collaborating with your dealership counsel, accountants, and investment advisors to ensure transparency and compliance.
3. Ability to lend to yourself with interest
Where do you get funds when unexpected expenses occur? The right Dealer owned reinsurance program allows the Dealer to be their own lender. If your reinsurance program offers this already, what percentage of unearned premiums does your current provider allow you to borrow? And your earned premiums? And how much interest do you pay on that loan? Where does the interest go?
The right provider would allow you to borrow up to:
- 75% of your unearned premiums (up to 100% in certain States)
- 100% of your earned premiums
Interest accrued from the loan would return to your reinsurance reserve. To enumerate, the money returned in the form of interest then goes back to work for the Dealer’s wealth development.
4. Choice to reinsure more products
Are you reinsuring as many products as you could? Underwriting profits exist whether a product is reinsured or not. If you are not reinsuring as many F&I products as possible, there are underwriting profits still being collected – just not by you. In addition, the right reinsurance provider will have a team in place that assures your profits are going into your pocket. Not to mention, the option to increase the number of F&I products you are reinsuring is a powerful tool to catalyze the growth of your long-term wealth.
5. A diverse team working for your best interest
Who is on your reinsurance provider’s team? Your wealth should not be controlled by a single entity. The reinsurance program should be managed by a diverse team of specialists from separate entities controlling single aspects. Many providers will offer an in-house team as a complete solution. This can be problematic for 3 three reasons:
1. Conflict of interest between you and the administrator and or underwriter
2. Lack of transparency related to ceding and other fees
3. Difficult to see who holds the money and for how long
In short, a reinsurance program that works in the best interest of the Dealer will keep arm’s length separation between each aspect of every transaction.
- The administrator manages the claims.
- The F&I agent of your choice drives in-store production.
- Reinsurance specialist hawks loss ratios and ARC profitability.
- Your investment specialist drives return on invested premiums.
- Independent reinsurance expert attorneys & CPAs assure your ARC is IRS compliant and tax returns are done properly.
Notably, all of these components working separately yet collectively on your behalf ensures the best environment for your reinsurance success that produces long-term wealth.
6. Flexible and customizable F&I product offerings
Is your current provider allowing you the needed flexibility and customization to best meet your market’s needs? Your F&I and reinsurance profitability depends on selling the right products for your market. Therefore, to best meet your dealership’s goals and your customers’ needs, you must have an expansive suite of products to choose from. Likewise, you should have the choice to bundle menu items and explore strategies to create added value. This is key to building and developing wealth. After all, it is your business.
7. Transparency with detailed reporting
How often do you receive reports detailing your team’s sales results, your costs, and your progress towards your F&I and revenue goals? How comprehensive are these reports? A trusted reinsurance provider should produce quarterly reports at a minimum showing:
- Complete financial statement for your reinsurance company
- Record of loan status and dividends
- Detailed report of product performance including individual claims
These reports should be provided voluntarily and reviewed methodically with your agent at least quarterly to properly track the growth of your wealth. Single page reports available upon request or infrequently are insufficient and could be a sign of a larger issue. Significantly, detailed reporting is necessary to track your reinsurance performance and build long-term wealth.
8. Claims processes that support overall success
How do claims affect your cashflow? You and your team should be provided with proper training and support to confidently sell F&I products and manage claims, with supportive processes available. This could include:
- A net-net remit policy that allows you to deduct claims and cancellations rather than wait for reimbursement
- Dealer input in critical claims decisions
These two things make a remarkable difference to dealership cashflow. In addition, your provider should be offering both options to best support your wealth development.
9. Access to your money when you want it with dealer owned reinsurance
What would your reinsurance provider say if you called them and asked for funds today? How quickly would you get access to those funds? Dividends from underwriting profits should be made available to the Dealer at their own discretion and upon request. Many providers make getting funds complicated and time consuming or will only offer it once a year upon approval. To point put, one of the most valuable elements of building wealth with Dealer owned reinsurance is having access to your dividends on request.
10. Low admin fees come at a cost
Yes, price matters. However, the mistake a successful Dealer never makes is prioritizing initial price over long term return and production that supports wealth development. If a provider is pitching low admin fees to you, it is important to consider why. Is the total price you will pay 100% disclosed? How do you know?
In short, when assessing your reinsurance provider, knowing where the money goes, how quickly it goes to work, and who benefits from invested premiums, is non-negotiable.
Overall, a reinsurance program that offers Dealer control, customizability, detailed reporting, immediate access to funds, and full transparency exists. It is this type of reinsurance program that is different from the rest and is essential to building long-term wealth. Let us prove it to you.