Inventory shortages are projected to continue through the end of the year as production schedules take the hit from ongoing computer chip scarcity. Dealers are all fighting the same battle now, forcing owners to continue to reassess their practices, streamline their operations, and retool their capabilities to find their way through. Claims management is one of the more important practices to examine, according to experts in claims administration.

“I was a dealer,” explains Michael LaMotta, CEO & Founder of DOWC®, a top U.S. service contract provider and administrator. “I know exactly what this process looks like from the inside out. But what I see now, from the other side, is very few dealers who truly play an active role in managing one of the largest expenses a reinsurance company or warranty company experiences: claims.”

Taking steps to improve that process is one of the most direct routes to profit growth a warranty company owner can take. “The single best way to manage profitability of any business is to control its expenses,” LaMotta says, “and car dealers are generally great at that. But in too many cases, dealers and their staff have no idea what is being approved on a day-to-day basis by their service contract administrators.”

One area where things may go wrong is the misuse of service contract benefits. It is not unusual, for example, for liberties to be taken with covered items by service writers who earn commission per service written. Dealers can take firmer control of the claims process and reduce costs by:

  • Minimizing the amount of fraud that may result from practices involving pay plans, commission structures, and objectives/goals set by service departments.
  • Controlling and limiting the number of unnecessary claims.
  • Training service departments to properly manage claims with the goal of reducing expenses (i.e., purchasing reconditioned wheels, rather than new, thereby a reducing the cost of a tire & wheel claim by 50% or more).

Another way to decrease expenses is by limiting “transient” claims – any repair that takes place outside the original selling dealership that issued the service contract. As LaMotta explains, “Allowing a transient claim is exactly the same as walking into your competitors’ offices and moving money from your pocket right into theirs.”

Dealers who take an active role in limiting transient claims benefit in several ways:

  • Keeping costs down by eliminating abuse.
  • In-house repairs performed at inherently lower rates than elsewhere.
  • Transferring money from left pocket to right instead of to the competitor: If a claim must be paid or a repair performed, the dealer wins by paying themselves to do it.

This all begs the question, what’s the true cost of a claim? The true cost of a repair (assuming the repair is performed in-house) is the flat rate paid to the technician and the actual cost of the part. Most dealers experience flat rate averages between $25 – $40 depending on the experience of the technician performing the repair. Most door rates for labor can fetch upwards of $200 or more in some metro areas. This puts labor profits in the 400 – 600% range. Parts markups are somewhere between 30 – 60% depending on the type of part. When the repair is performed outside of the selling dealer (transient), the true cost of the claim is whatever total amount was approved by the administrator.

A good question for dealers to ask themselves is “What percentage of approved claims are being paid to my competitors?” If the answer isn’t readily available, this is an excellent place to start. Dealers should have access to that data point and examine it monthly to keep a close eye on transient claims.

This is all the more important for dealers who participate through ownership of a warranty or reinsurance company: reducing or eliminating transient claims is critical to increasing profitability. For those who participate, as well as those who don’t, this can be achieved through well-crafted service contracts that include a tie-back to your dealership, carefully training service writers and service departments in best practices, and, most importantly, taking an active role in managing claims in conjunction with an administrator you trust.

As a full-service finance and insurance product provider, DOWC has a direct view into the negative impact transient claims and overall poor claims management have across the industry. It strives to service its dealer partners with transparent reporting that explicitly quantifies transient claim rates and works diligently to reduce them. DOWC’s offers vehicle service contracts, GAP coverage, and a range of specialized products including protection for tire and wheel, technology systems, theft, total loss, as well as pre-paid maintenance packages, and more. Each of their F&I products is customizable and offers a dealer tie-back for service and repairs. In addition, DOWC assists dealers in establishing warranty companies and reinsurance companies, provides expert compliance guidance, and utilizes advanced selling platforms to drive dealer success.

Auto retailing is retailing, period. Once the pandemic hit, online shopping went through the roof for industries far beyond clothing and groceries. Auto sales made a dramatic shift while dealerships were shuttered during lockdowns across the country and shoppers turned to the internet in droves. According to a recent survey*, 60% of respondents indicated they were open to buying a car online while just 32% were willing to do so before the COVID-19 pandemic. 

Has this shift meant a magical transition to seamless digital sales across the industry? Certainly not. But the trend is moving in the right direction with more retailers shaping their strategies to move from simply using the internet as a tool to bring people into the dealership to truly offering a comprehensive virtual sales experience. In this moment of seismic change in the retail environment, it’s critical to understand that brick-and-mortar days aren’t necessarily over – but to stay relevant and competitive, physical dealerships require expansion to include a digital storefront as well. 

This expansion has to include evolution in online F&I presentation to ensure customers are being offered a full range of services and that the full scope of revenue opportunity is being captured. Unfortunately, it took COVID-19 to bring us to the inevitable, but here we are. Taking an entrepreneurial approach, and following the example of those who are leading the charge, is a great place to start. 

Now is the perfect time to: 

  • Evaluate your online capabilities. Do you have efficient and scalable e-commerce functionality? Do you have the staff or professional resources to build and manage your online offerings? 
  • Educate yourself on best practices. Make a careful study of your competitors or those in the industry that have successfully shifted to digital retailing. Carvana is one resounding example: They reported second-quarter revenues of $1.12 billion and nearly 56,000 units sold, an increase of 13% over 2019, with the number of cars sold up 25% year over year. What are they doing right and how can you translate some of their best practices to your structure? 
  • Partner wisely and train thoroughly. Invest in digital retail tools that are integrated with your CRM and website, and test for user experience improvements. Simplify and make the digital retail process consistent for all customers, providing sufficient training and documentation to your sales and BDC teams. 

While this evolution/revolution may be a dramatic change for your business, you don’t want to be left behind the pack that’s charging ahead in the digital race. You also don’t want to leave revenue on the table. Just as you wouldn’t finalize a sale without offering F&I options to a customer in person, you’ll want to integrate digitized menu selling seamlessly into your online offerings. Keeping in mind that in-house sales are not vanishing either, carrying this optimized customer experience into the back room is critical as well because these interactions will continue to be shaped by the need for a streamlined, efficient presentation to minimize time and contact. 

But in this area, it’s about much more than just automating the conversation around protection products, extensions, and add-ons. This is where harnessing the digital aspect of your platform can make an eye-popping difference.  

Look at some of the top digital retail solution providers in the industry for example. The F&I presentation software they offer have been adapted successfully by some of the largest and most prestigious automotive groups in the country because they go well beyond replicating the exact same presentation that a dealer may have been using for 20 years. These tools utilize big data and predictive analytics to create a tailored presentation based on the overall deal, vehicle, and financial situation for each customer. Pair power like that with a service contract provider and administrator committed to helping you build wealth through best-in-class F&I products and you’ll take your digital strategy way above the next level. 

Once you’ve hit all the marks in developing your online presence, amp up your marketing to make sure people know about it. Hit social media and make good use of customer data you already own to spread the word through email outreach or whatever works best for your brand.  

Online auto retailing is here, it’s vital, and it’s valuable. The best time to get started was yesterday. Don’t waste another minute. 

*https://dealers.cargurus.com/rs/611-AVR-738/images/June_Covid19-SurveyUS.pdf 

 

Michael LaMotta is CEO of Dealer Owned Warranty Company. He founded DOWC® with lessons learned from almost 30 years of automotive experience, many of which spent as a car dealer and almost a decade spent on F&I administration. DOWC is the fastest-growing service contract provider and administrator in the United States. DOWC offers customizable F&I products and expertise in compliance, as well as a full suite of technology designed to optimize productivity and expedite claims adjustments, processing, and reporting.   

 Story on AutoSuccess Online

RINGWOOD, N.J. – 

For the second time this month, Dealer Owned Warranty Co. (DOWC) enhanced its menu of F&I products.

Coming on the heels of introducing NitroShield, a complete tire and wheel protection product, DOWC on Friday rolled out new 360Shield protection solutions enhanced with new antimicrobial products, providing improved vehicle protection.

The company highlighted the 360Shield antimicrobial protection treatment includes interior cleaning and protection processes for interior surfaces like the dashboard and seats, using an antimicrobial solution formulated to disinfect and prevent against mold, mildew, bacteria, and other microbes like the COVID-19 virus.

Additionally, DOWC emphasized that the 360Shield disinfecting air quality and odor treatment is designed to work in a vehicle’s hard-to-reach areas, like the climate control system, using a specialized thermal fogger. Suitable for use on both porous and non-porous surfaces, the 360Shield air treatment is available in mint-scented or fragrance-free solutions.

Both 360Shield treatments are formulated to kill surface germs, as well as inhibit the future growth of bacteria and microbes, according to DOWC.

“We are very excited about what our two new additions to 360Shield will provide to the auto industry, as restrictions are lifted and dealerships reopen,” DOWC founder Michael LaMotta said in a news release. “Improved safety at dealerships means improved safety for dealers, car shoppers, and ultimately, vehicle owners everywhere.”

DOWC emphasized 360Shield solutions have been enhanced to meet the highest industry standards for sterilization and provide long-lasting, quality protection. Providing antimicrobial protection, the company said both the 360Shield antimicrobial protection treatment and 360Shield disinfecting air quality and odor treatment can preserve the quality and safety of the vehicle’s interior for the warranty period.

The full suite of 360Shield protective products, which also includes PaintShield, WheelShield, GlassShield, InteriorShield, and BodyShield, is available to DOWC partner dealers and their customers.

All 360Shield treatments are backed by warranties that provide for the repair, repainting, or replacement of any covered parts.

For more information, visit www.dowc.com, call (201) 777-1000 or send a message to support@dowc.com.