Once a powerhouse revenue generator in the F&I office, credit life and disability insurance is on the wane.
Tighter regulations and more attractive insurance products have moved credit insurance to the back burner, according to several dealers and F&I experts.
It's a dying business, said Dave Robertson, executive director of the Association of Finance & Insurance Professionals in Colleyville, Texas. “Sales have dropped every year since I've been” in the industry, he told Automotive News.
Gary Fagg, a consulting actuary with CreditRe of Hurst, Texas, said credit insurance, which peaked in 1980, used to be accepted by about 70 percent of customers financing in the dealership F&I office.
Today the acceptance rate has plummeted to about 5 percent. Fagg estimates that credit insurance sales are now less than $300 million annually, down from a peak 30 years ago that would equal $2 billion in today's dollars.
One of the nation's largest dealership groups agrees that credit insurance has gone by the wayside.
“That will be minimal, if any, of our revenue,” said Charles Oglesby, CEO of Asbury Automotive Group Inc., the 80-store public dealership group based in suburban Atlanta.
Glenn Mears, owner of Parkway Auto Group, which has three dealerships in Dover, Ohio, said his credit insurance revenue has been in decline for at least 10 years.
The amount of premium income possible in Ohio has been regulated downward over the years, Mears said. And products such as service contracts are more lucrative -- plus they tie the customer more closely to the dealership, improving the prospect of repeat business.
“I'd rather have someone spend X number of dollars to ensure they're going to come back into our service department than ensure that their car is paid off when they die,” Mears said. “It's easier to sell that value.”