Dealership Savings? Captives Steer the Wheel

The car dealership landscape is fiercely competitive. Keeping costs under control is crucial for success, as it involves managing inventory, sales staff and customer service.

One area dealerships often overlook for potential savings is ancillary products. The traditional system can be expensive and inflexible, leaving dealerships exposed to rising costs and limited coverage options.

This is where captive insurance comes in.

What is captive insurance?

A captive insurance company is a wholly owned subsidiary established by a business, or a group of businesses, to insure its own specific risks. Think of it as your own mini insurance company, built around your dealership’s needs.

Why consider a captive for your dealership?

Here are some key benefits a captive can offer your dealership:

• Cost control: A captive can help reduce the overall cost of ancillary products by cutting out some traditional overhead and fees.
• Coverage flexibility: A captive lets you design service contracts around the risks your dealership actually faces, such as extended service contracts and maintenance plans. You can tailor coverage to the components or vehicle models most relevant to your inventory.
• Claims control: A captive gives you more control over the claims process, which can mean faster resolution and fewer fraudulent claims.
• Profit sharing: If your captive has an underwriting profit, it can be returned to the dealership.
• Better risk management: A captive rewards good practices in your dealership, such as careful reconditioning, which can mean fewer claims and better inventory quality.

Is a captive right for your dealership?

A captive is not a one-size-fits-all solution. It can seem like a strategy only for large companies, but smaller dealerships can also look at whether a captive might fit.

Next steps

If you’re interested in what a captive could do for your dealership, here’s where to start:

• Talk with a captive manager. A qualified captive manager can look at your dealership’s volume and risk profile and tell you whether a captive makes sense.
• Look at your needs. Identify the products you sell most and how a captive could give you tailored coverage and more control over costs.
• Think long term. A captive is a multi-year commitment.

Taking control of the protection products your dealership sells can be a powerful way to manage costs, improve risk management and steer your business toward greater profitability. Contact us to find out whether a captive is the right road for your dealership.