Reinsurance: The Often Overlooked or Unexplored Profit Center for Dealers

By Eric S. Hurst, EVP, COO, National Lenders General Agency, LLC

2022 looks to be a continuation of rapid evolution, inventory shortages, wholesale prices remain near-record levels, inflation, cost of capital is likely to rise, and let us not forget the need to electrify the dealership.

I have spent over 30 years in this space, and, like many of you, I look at the market today, and it is without a doubt overwhelming. The question at every convention is: Which widget will dominate the market next? If I knew, I promise I would tell you. I cannot.

What I can tell you is this… behind all the glitz and glamour of the fancy gadgets remains the most underrated profit engine and tax strategy dealerships do not take advantage of – reinsurance. Worse yet, dealers feel they cannot reduce the commission or administrative fees being paid for these services. Dealer-owned reinsurance companies and products exist by the thousands.

For those of you presently engaged in reinsurance programs, maximizing returns should be a top consideration this year. Those deferral accounts can fund needed technology and modernization improvements. Tax-deferred accounts can produce significant cash reserves. Often overlooked are the short-term aging products that produce full cash benefits in weeks rather than years, as is the case with so many long-term vehicle service contracts.

If reinsurance is a mystery to you or you don’t think you’re large enough, think again. Dealers who sell, regardless of size, engage in various forms of reinsurance programs to maximize profits and available tax strategies. It is not out of reach for virtually every dealer.

In closing, pound for pound of all the products a dealer can invest in 2022, reinsurance is by far the single greatest investment a dealer can spend time on – either enhancing or beginning some form of a reinsurance program.

This article appeared in the June 2022 Issue of BHPH Dealer Magazine.  Read the publication here.