The Client
A three-store automotive group on the West Coast that had a 10-year relationship with its F&I reinsurance provider was not satisfied with its reinsurance results.
The dealerships and their reinsurance program were part of what the incumbent provider described as a “special deal.” The dealership switched their reinsurance program to JM&A Group when offered the potential to lower loss ratios and create a closer, more interactive partnership with a new provider.
The Challenge
The set it and forget it approach
In many cases, an F&I provider simply sets up the program and then steps back, not interacting heavily with the client after the fact. That’s more or less what previously happened for the LA area dealership group.
The provider offered only limited in-store assistance with training and associate development, leaving dealership representatives on their own. The previous provider did not monitor the book of business closely to detect whether there were opportunities to generate extra value by modifying product offerings or pricing structures.
Dealing with this hands-off approach and seeing loss ratios climb higher than predicted on used vehicle reinsurance and GAP programs, the organization connected with JM&A Group. A side-by-side examination of the existing program with new potential offerings, revealed several opportunities to reduce fees and begin a more mutually beneficial relationship.
The Difference
"The organization also gained access to a more active, and available team of representatives, who frequently visits the stores to make sure the F&I department is reaching their full potential."
The Solution
Simple and transparent fees with performance consulting
From the initial comparison of fee structures and plan options, it became clear that JM&A Group’s hands-on, collaborative and data-driven approach to reinsurance along with a simple and transparent fee structure could save the organization money.
The comparison involved a sample service contract, showing where each dollar of the deal would go. By tracing the path of funds spent on taxes and fees, the organization’s leadership team realized that they were paying extra taxes because the current provider was domiciled in a different state with higher premium taxes. Furthermore, the current setup involved paying a ceding fee on each deal — JM&A Group’s offerings do not.
Working with JM&A Group on reinsurance means improving products and offerings over time, based on hard data analysis. Using Tableau-based analytics and visualizations as part of a sophisticated reporting program, JM&A Group personnel can pinpoint areas where certain products are not generating optimal value, suggesting adjustments, as appropriate over time, that can lead to ever-improving margins and results.
Taking such a close view of the reinsurance program and an active approach to associate development, the collaboration has become a true partnership. When one party benefits, so does the other, and there is room for the relationship to stay strong and expand over the years.
It’s easy to see how far the organization has come in under two years. The previous program, in which a disconnected reinsurance partner had created a suboptimal lineup of fees and taxes, and had a hands-off approach to reserve adequacy analysis, was a source of wasted opportunity for profit. By embracing the JM&A Group model, the three dealerships have unlocked that hidden value.
By The Numbers
While it’s good to hear about a positive experience with dealership transformation, the true proof is in the numbers. Every component of the new system has yielded better profit margins for the dealership, with the results only increasing month after month. These figures tell an impressive story.
Average F&I PVR
Year 1 PVR Increase
$157
Year 2 PVR Increase
$316
Vehicle Service Contracts (VSC)
Year 1 Penetration Increase
9%
Year 2 Penetration Increase
17%
Products Per Deal (PPD)
2019
0.92
2020
1.44
2021 YTD
2.00
The pattern is clear: JM&A Group’s transparent fee structure and reserve discipline along with the in-store development and support, put the automotive group on a path towards increased profitability.
In an era when dealerships need to secure their financial position by maximizing returns from all available revenue streams, there is great value in implementing such a clear, effective and profitable approach.
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