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How car dealers can protect insurance sales after the FCA review

By Tony Willard

2015 looks set to be the year when the Financial Conduct Authority exerts influence on the way motor retailers select and prioritise the add-on products offered in their showrooms.

The FCA’s pursuit of “better customer outcomes” is already being made evident in its market study of general insurance add-on sales, including GAP, because it is convinced that selling a regulated insurance product as an add-on often leads to consumers purchasing products that are of poor value and not what they need.

Its proposals include a deferment period and advising customers they can purchase cover elsewhere.


Three tips for selling add-on insurance

    During the car sales process, the sales executive should establish whether the customer had taken out an extended warranty or GAP insurance on the car they will be trading in to indicate their likelihood to purchase again.
Cars aged three years and older that have been through the workshop for replacement tyres or an MoT test could have a monthly-payment tyre insurance or MoT cover quotation left on the driver’s seat, together with contact details for the service desk, to appeal to customers needing to control their budget.
Use the dealership’s website and social media accounts to educate and inform customers of the variety and role of different add-on insurance products, from cosmetic repair cover to GAP, that are available from the dealership.

Adrian Foster, managing director of consultancy Adroit Automotive, said there is still a future for regulated insurance add-ons, but profits will be on a different scale to those previously enjoyed. “Dealers will have to go down the road of offering four or five lower cost products and getting the customer to buy two or three rather than their current strategy of offering three and the customer might buy one,” he said.

David Parrondo, deputy managing director at Mapfre Abraxas, said the proposed GAP deferment period would allow features and benefits to be clearly explained face-to-face with customers. “It’s a chance for dealers to ensure they are meeting as many customer needs as possible by offering an opportunity to purchase a range of relevant insurance products,” he said.

Parrondo said the FCA would stipulate dealers must advise customers GAP could be bought elsewhere. In practice, that meant online, so dealers should work with insurance partners on ways to keep their products competitive.

Tim Heavisides, chief executive at Car Care Plan Group, said dealers often had access to more flexible finance options than high street lenders. They should find out what was important to buyers and tailor packages to meet their needs. “That could focus around monthly affordability more than outright purchase, so ask customers what they want,” he said. “Use the opportunity to promote the benefits of asset protection insurance and extended warranty to match the finance duration. Customers want long-term stability and peace-of-mind, so offer protection for as long as they’re funding the car.”

Spencer Halil, general manager at BMW Group UK Financial Services, said senior motor retail managers must have a clear understanding of what they want to achieve from

F&I, how they are going to do it and communicate this with their teams. “Make sure you have the right people with the right skills,” he said. “If you have the volume, invest in a business manager with the right attitude and level of training. Make your manufacturer’s finance team earn your loyalty by assisting the performance of your teams.”  

Halil said dealers should implement pay plans that incentivised teams while putting customers first. “Use a balanced level pay plan that focuses on qualitative KPIs above profit and volume,” he said.

Nigel Land, marketing director at AMS Insurance Services, said dealers needed confidence in the GAP insurance they were selling. “If they don’t, it is time to look for a new provider,” he said. “Take advantage of your GAP supplier’s free on-site training and coaching.

“This helps to structure the customer presentation to improve closing rates. Use point-of-sale tools to demonstrate the real value of GAP insurance and provide information to explain differences between your policies and those of competitors, including those online.”

Land said dealers should take their time because there were so many documents for a customer to read, sign and digest when they purchased a car. “If you rush the process they can become distracted and frustrated, making it easier for them to reject GAP, without fully understanding its value,” he said.

MoT test insurance was ideal for all cars more than two years old, so sales targets should be set by age band. “Promote service plans to increase customer touch points and avoid aftersales support drop-off linked to MOTs,” he said.


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