Why F&I bundling has 'exploded'
Matta: "With the rise of reinsurance, dealers are understanding the insurance business really thoroughly."
Pitching auto customers a package of F&I products for one price, called bundling, speeds up the F&I sales process and helps dealerships shoehorn more products into a limited menu. It also gives customers fewer chances to object to pricing for individual items.
But bundling works for dealerships on the back end, too, because it makes F&I products more economical to reinsure, says Zack Matta, director of product and business development for Family First Dealer Services in Ponte Vedra Beach, Fla.
Reinsurance programs enable dealers to put up money for reserves against future claims and share in the profits and investment income from the money left over after claims and administrative fees are paid.
Matta spoke with Automotive News Special Correspondent Jim Henry.
You've added several new products. What are they?
Tire-and-wheel protection, complete protection 5-in-1, key replacement and a 60-day satisfaction guarantee.
Why those particular products?
In terms of the new products, it's based on our partners' needs. They wanted better products. A lot of it is aimed at bundling. The whole bundling idea has been around for a while, and it's been catching on for a while.
What's 5-in-1? Is that a bundled product?
Yes -- tire-and-wheel, paintless dent repair, roadside assistance, windshield protection, key protection.
Bundling comes up a lot in F&I conferences as a way to speed up menu selling.
Absolutely. It's consolidating your menu for you. You do have to explain different features and benefits -- what the service contract covers, the warranty review. But you shouldn't have to spend as much time individually on each product. It's less questions; it streamlines the process.
Dealers are reinsuring some of those secondary products, aren't they?
With the rise of reinsurance, dealers are understanding the insurance business really thoroughly. They get down into the details of the reserve money that's put away, admin fees; they're starting to understand that on the back end there are considerable cost savings with combo products.
Think of it as: I'm going to sell you [the dealer] four different products as one product. If you've got the same administrator, there's only one contract, one agreement, instead of all these other agreements. The administration cost is for one product. My cost as an administrator has to go down, right?
But each product must have a different likelihood of claims. Can you offset high claims on one product with low claims on another product and save money?
No. The same amount of reserves goes into someone's account. It's the same as reinsurance, only there are fewer fees. The fees are where the savings are. Instead of four or five admin fees for four or five products, there's only one. They [dealers] can keep margins the same, but if the costs go down, the profits go up. In the last three or four years, it's exploded.
You can reach Jim Henry at email@example.com.