Should I Own a Reinsurance Company?

All businesses have risk, but the insurance business is completely based on managing risk. So why should a dealer own a reinsurance company, especially in these challenging times for the automobile business? Fair question.

 

Nearly everyone has heard stories where the dealer was in a participation program based on underwriting profits, yet never saw any financial benefit because "the loss ratios were too high," or "the rates were too low," or some other reason. Dealers who have been around for at least ten years have seen some large providers of risk-based aftermarket products (like vehicle service contracts) go under without warning. Some of these business failures left dealers and their customers holding an empty bag. The obvious conclusion is that risk-based products often carry an unmanageable risk.

We at Portfolio have seen all these events and have heard all these stories too. But we also know our success of delivering profits and customer satisfaction to our dealers for nearly 20 years. We choose to act upon our positive experience and the belief,

               "for every problem there is a solution, and every challenge is an opportunity."

And it's not about raising rates. Customers won't pay for overpriced aftermarket products.

It's about knowing the business over the long term and striking the proper balance between serving the customer's needs, fitting into the dealership's profit strategy, and keeping the reinsurance company healthy, because it is the party that takes the risk of paying for the customer's repairs.