CDK makes 'strategic bet' on car insurance

CDK Global Inc. sees "huge untapped potential" in the U.S. auto insurance market as an element of the digital vehicle sales process, an executive told Automotive News.

The Hoffman Estates, Ill., dealership management system giant last week said it plans to acquire Salty Dot Inc., an insurance technology company that allows consumers to purchase auto insurance at the same time they're buying a vehicle. Terms of the deal were not disclosed, though CDK Global COO Joe Tautges said the transaction is expected to close in October.

CDK's play for Salty, founded in 2019 by CEO James Hall, is a "strategic bet" that the company's technology will improve consumers' car-buying experience, Tautges said. And CDK says the U.S. auto insurance market, estimated at $311 billion this year by industry research firm IBISWorld, also is a potential new revenue stream for dealerships.

"It's not just about their size, but it's about the change that's happening in each of these [industries]," Hall told Automotive News. "The digital retailing experience in the auto space, it's changing rapidly. The consumers' expectations are changing rapidly. ... It's the same in the insurance technology space. ... And for us, we think this is just a perfect alignment to partner with CDK and grow this market."

Dealerships have increased their use of digital sales tools since the onset of the pandemic last year, including online presentations of finance and insurance products. Interest appears to be growing to link auto insurance with the car-buying process.

Last month, JM&A Group, one of the largest F&I product providers in the U.S., J.D. Power-owned Darwin Automotive and digital insurance marketplace DealerPolicy said they are working together in this area.

"Overall, we do see insurance playing a bigger role in the transaction as a whole, and I think the natural spot for that to fit is within F&I," said Nick Funsch, director of sales strategy for JM&A Group.

One possible result of bringing auto insurance into the vehicle sales process is that dealerships could help buyers make purchase decisions with insurance included in the cost of ownership, especially if a consumer saves money on a policy, Funsch said.

Salty's tool allows car buyers to receive an auto insurance quote from participating carriers before they finalize their vehicle purchase, which prevents the consumer from having to leave the vehicle transaction to buy coverage, Hall said.

In July, Salty said Asbury Automotive Group Inc. is using its insurance technology within the dealership group's Clicklane digital retailing platform. Dan Clara, Asbury's senior vice president of operations, said on the company's second-quarter earnings call in July that Salty offers "a one-stop shopping experience for our guests to include their car insurance needs." Asbury last week declined to provide additional comment about the acquisition.

Mike Maroone, CEO of Maroone USA, which has six stores in Colorado and Florida, is an investor in Salty and joined the company's board this year. He said his stores introduce Salty's insurance tool after consumers have selected a vehicle but before they meet with the F&I office.

Marrying auto insurance to the car-buying process could be the next product evolution for dealerships, he said.

"I think this particular product fits the digital journey," Maroone said. "I think a fully integrated suite of tools makes a whole lot of sense."