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Insurance insight: Caution over commission

However, Manning said the approach would vary depending on the franchise. Dealers selling prestige brands may have more success with paint and alloy wheel cover than mainstream franchises.

David Johnson, group finance and insurance manager with Perrys, said: “What you need to put in front of the customer is a sensible portfolio, not an exhaustive list. The sales procedure is protracted enough as it is. The customer can be left feeling fed up.”

Eric Stone, business development director of the WMS Group, reinforces the point that add-ons help customer retention. “Historically, there have been many commoditised products that could only draw revenue at the point-of-sale, whereas our business has successfully been built on providing not only front-end revenue, but also helping with workshop absorption.”

Since the start of 2012, WMS had seen a 13% uplift in the sale of MoT insurance, with businesses recognising that such products can almost guarantee to bring the customer back. “These products carry a range of profit-making opportunities at the point of sale, repair and at renewal.”

Stone said tyre and alloy wheel insurance was proving to be another appealing offer, building value in the mind of the customer (as well as the sales executive), and available as either stand-alone or combined.

“For franchised dealers, it is not uncommon to see wheel and tyre penetrations in excess of 20%, with this figure rising to 40% in specialist or luxury franchises,” he said. “Profit margins depend upon the RRP, but with a total customer value of £2,500 and an RRP of £299 for three years’ cover, dealers could expect a post-tax margin of £150.”

Stone said the supplying dealer may also earn revenue on refurbishment of wheels and the replacement/repair work on tyres.

Warranty Direct used to offer MoT insurance, but this is now included in its extended warranty. McClure Fisher said sales penetration of GAP and paint protection tended to be better than lower margin options such as extended warranty.

Nick Jones, group finance manager at Vauxhall dealer Greenhous, said insurance products typically add 10-15% as a percentage of profit to each used car.

“We are looking at MoT insurance. It’s something Vauxhall is keen to get involved with,” he said. “We offer our Protection Pack with a leaflet explaining the options, including ValueGuard for GAP, along with the NetworkQ extended warranty.

“We stopped the smart repairs option because of lack of demand, but drill down on GAP because it’s seen as vital protection for the customer, followed by Diamondbrite (paint protection) and warranty.”

Perrys’ David Johnson said the group separated regulated products like GAP from the non-regulated. Two-thirds of the company’s outlets had a business manager, with satellites featuring a sales manager, controller and two supervisors. “Offers like MoT cover would not typically be offered at point of sale, but they may be included in the future,” he said.

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