Vehicle Service Contract Reinsurance Overcomes Third-Party Limitations

A vehicle service contract, also known as extended service contract, is a program offered by dealerships to their customers through a third-party provider. The goal of this contract is to provide owners with an added layer of protection against unforeseen expenses in case of a mechanical breakdown. The difference between this and a vehicle service contract through reinsurance is that the dealership has more control over the program if offered through their own reinsurance company.

Limitations of a third-party vehicle/extended service contract

In a typical dealership-provider setup, the dealership's agents will help buyers find the F&I solution that best fits their needs and financial capacity. The agent will discuss details with the third-party provider and exhaust all avenues until a mutually beneficial compromise is reached. The extended service contract specific to the customer's needs will then be offered and subsequently purchased. While the contract can be customized, it may not be as flexible as compared to one offered by the dealership through their own reinsurance company.

The other limitation to a third-party F&I product is the claims process and reimbursed amount. Sometimes, a claim is denied or rejected because of some technicality, which is sometimes a stipulation in the contract that the owner found confusing but failed to clarify before purchasing the program. Sometimes, too, the reimbursed amount isn't the full covered amount mentioned in the contract. Again, this could be a technicality that worked in favor of the provider.

Flexibility of a vehicle service contract through reinsurance

When a dealership has their own vehicle service contract reinsurance company that also offers other F&I solutions, they have more control over the claims and approval process. This benefits customers because now, their claims won't be instantly rejected because of some technicality. Their claims can be approved as quickly as 24 hours, which means they will no longer have to worry about suddenly being asked to pay for the repairs because the provider rejected their claim.

Also, they could expect a full reimbursement of the repairs or parts replacement based on the terms of the extended service contract.

On top of customers' benefits, the best part about having your own reinsurance company is you will eventually have an improved cash flow as the premiums paid by your customers will now go to you instead of the provider. Whatever is left after claims, and from matured programs, will go to you based on what you and the reinsurance provider have agreed upon.

You won't have to worry about being in the red even if sales are down because now, you have another source of income. You can also use your reinsurance profits to invest in equities or to grow your business.

What other benefits can you get from having your own vehicle service contract reinsurance company? Call Torque Group at (800) 859-0590 to find out. You may also leave a message here.