Insurance and financing have traditionally been very separate businesses, but a division of The Allstate Corp. is testing a few pilot programs that could bring the two industries closer together, said Tom Capp, senior vice president of business development for the company’s Answer Financial division.
Prime consumers, especially those looking for luxury vehicles, typically have insurance when they walk in the door, Capp said. However, the near prime and subprime consumer might not have insurance — whether they are coming to the car buying experience online, or at the dealership — that’s slowing down the whole process and making for an unfriendly customer experience.
Answer Financial would like to get people signed up for insurance online while at the dealership, through a more integrated digital system so that the consumer isn’t leaving the lot. This strategy also includes on-site agents from the Allstate Auto Dealer Program.
“Dealers have come to us and said ‘I can’t sell them the car unless they have insurance,’” Capp said. “‘So I’m sending them down the street to some guy who is a mile away, I may know the guy, I may not. The customer has now left my lot, he stops at McDonalds along the way and decides, ‘eh, I’m not going to buy a car.’ Or it’s a Saturday afternoon and the agency is closed. Is there someway we can do all the insurance transaction in the dealership?’”
Companies have tried to solve this problem in the past, but Capp believes the technology wasn’t ready then, but it is now. The company’s pilots are testing to see whether the technology is best utilized at the point of sale or in the F&I office.
“We can integrate technically into the F&I processes because the F&I systems have the data to run the price,” he said. “But, there is a concern that it’s going to mess up the F&I guy’s process that he’s going through, so we are trying it at the sales point [first].”
This has been an issue for online financing as well, because in order to develop an appropriate insurance policy, the consumer has to have a VIN number. Most consumers don’t know what vehicle they want when they are shopping online, and — because of poor integration online — wind-up just waiting until they are in the dealership to sign a policy.
Combining the insurance payment into the actual loan or lease payment — which some alternative ownership models such as Book by Cadillac have done — could help shorten the process and get more people covered, Capp speculated. However, it may start at the subprime level.
“It’s when you start to go to people lower down the income ladder, their ability to make those payments is harder, so anything you can do to get them a reasonable price with the best coverage, things like wrapping the insurance into the financing helps cover them,” he said.
However, there are similar policies that have caught the attention of the Consumer Financial Protection Bureau, called forced coverage. This type of coverage is sometimes enforced when subprime buy-here-pay-here borrowers cancel a policy on their vehicle just weeks after driving it off the lot. The dealer can implement forced coverage to insure the vehicle — but not the driver — and add that payment to the borrower’s loan title, which is “very expensive,” Capp said.
By merging the insurance payment and the loan payment in a more transparent way, Capp theorizes fewer consumers would fall into this trap. But for now, it’s focusing on better servicing the uninsured at the dealership.
