If the last two years have taught us anything, it's that preparing for the unexpected should be part of your strategy from now on. That can mean having the tools in place to shift priorities at a moment's notice. But it should also mean taking the time to analyze your reinsurance program's strengths and weaknesses and evaluating where you are when it comes to running the most profitable business possible and meeting your goals.
Over the past couple of years, many dealers have seen a net positive impact on their reinsurance positions, thanks in large part to increased performance in F&I. There have been significant conversations about the rising tide in F&I associated with the pandemic and many discussions that dissect the reasons for these increases and how to maintain the same growth in the future through improved processes, better customer experiences, and enhanced product offerings. While F&I growth has been in the spotlight, let's not forget that increases in F&I production have translated into increased written premium ceded to dealers' reinsurance positions. Just as crucial in the conversation should be an analysis of reinsurance performance and future growth. That said, it's critical to take the time to analyze your own performance and how you measure up to what's happening outside of your lot.
This concept of benchmarking performance is a familiar one in the automotive industry. Many dealers already participate in 20 Groups to share and compare financials and metrics to learn what other dealers are doing to drive success. Benchmarking in reinsurance follows a similar thought process—working to understand how other dealerships are performing and how their strategy impacts their losses relative to what they see in their reinsurance position. At the prospect of even more analysis in a numbers-heavy industry, it's not uncommon to hear dealers ask why they should care about key performance indicators if their profit margin is healthy today. But after analysis, you'll have a better idea of what changes can be implemented to improve your ongoing loss experience, increase premiums written, enhance investment returns, and shorten the earnings cycle to allow for expedited creation of distributable surplus. Here's a look at why, how, and what to benchmark and some real-life examples of how your dealership can benefit.