November 30, 2023
If you’re a dealership leader, you’ve seen a lot of pressure being added to your customers’ wallets this year. Interest rates rose, and with them, monthly car payments soared to all-time highs ($736 in Q3 of 2023).
Not surprisingly, auto loan defaults are on the rise. And then there’s auto insurance, which along with everything else, was greatly affected by inflation and saw a nearly 20% increase year over year. You can read more about why rates increased so much in an article by our own Tom Lyons [link], President of Insurance at Polly. But why should you care about a recovery in the auto insurance market?
This year more than ever, it’s becoming apparent to dealers that auto insurance is an important consideration for consumers when it comes to the overall cost of car ownership.
In our forthcoming study, we’ll have some stats to share on just how important the total cost is to consumers. But the spoiler alert is that auto insurance isn’t an afterthought for the average car buyer. And that’s one of the biggest reasons why you should care that signs are pointing to a recovery in the insurance market. Because it matters to your customers, and it affects their budget.
When the market recovers, carriers will be more receptive to new business. What we saw this year was that carriers did not want to quote new business.
With inflation running so high, carriers were scrambling to adjust their prices to cover their risks. For the duration of time when their rates weren’t doing that, carriers did not want to add new customers because they’d be taking a loss on the business. That meant that a lot of people had fewer options when it came to insuring their vehicles; many carriers simply didn’t want their business. What does this mean for you as a dealer when carriers are eager for your customer’s business? It will be easier for your customers to obtain coverage, and they’ll also have more choices in which carrier they go with. In an ideal world, you’ll have an insurance platform that acts as a marketplace, so your customers can shop around and find a good deal, saving them money they can put toward their new car.
You have more to gain from an insurance recovery than you might think, particularly if your only exposure to auto insurance has been when your sales team hands the business card of the local insurance agent to first-time car buyers.
If you don’t already have a holistic insurance platform in your dealership, then you’re missing out on a key piece of the revenue pie, which will only be expanding in 2024. Whether you choose to simply earn referrals, or become licensed and earn commissions, an insurance platform gives you the chance to own a new revenue stream. It’s a business opportunity that can be used to offset the margin compression that’s returning to the automotive industry.
As we look toward a market recovery, it’s the perfect time to get your dealership set up to benefit from it. If you already have an insurance platform in place, then we have a few recommendations we’ll share in future pieces for ensuring that you are in a great position when carriers begin reopening their doors. And if you don’t already have one in place, well, what are you waiting for? Your customers are ready for it. Are you?