By Ryan Hanlon
In a relatively short time, reinsurance has upended the traditional RV dealer model. Now you can own not only your dealership and the land it sits on but underwriting profits and investment income from the F&I products you sell.
Reinsurance company ownership has made a growing number of RV dealers wealthier and more independent than they ever dreamed possible. But not every RV dealer owns a reinsurance company, and many of those who do could be trapped in underperforming structures.
In that respect, reinsurance has failed you. As providers and consultants, we need to do a better job of introducing the concept of owning a reinsurance company, finding the right structure for you and maximizing your returns.
When I started working with dealers in 2004, reinsurance was still widely considered experimental, speculative and even risky. It is none of those things — as evidenced by two IRS Technical Advice Memoranda secured by Portfolio around that time — but perceptions can take a long time to change.
If you also sell cars or know any auto dealers, you know reinsurance company ownership took hold in that segment quickly. Nearly every franchised auto dealer owns at least one reinsurance company today. RV, marine and powersports dealers have been slower to adopt reinsurance, and penetration levels in those segments remain surprisingly low.
Why? Well, I can only speak for myself, but for a good number of years, our growth rate in auto was so high that we spent almost a decade running from new deal to new deal. I personally got into the RV space through an auto dealer who also owns an RV business.
And I’m glad I did. RV is very different from automotive — different lingo, different supply chain issues and the need for a different skillset. The learning curve is steep, and that is perhaps the main reason so many providers have ignored the space completely, to the detriment of RV dealers.
The Year Ahead
If you have yet to form your first reinsurance company or you have thought about changing providers or structures, there is no better time than now to start.
For all the challenges 2020 threw at us, RV sales are soaring and show no signs of slowing. You have to maximize the short- and long-term profits on each of those deals. You also have to plan for growth, solidify your succession plan and keep your most talented people on the payroll. Properly structured and managed, a reinsurance company can do all that and more.
Thanks to a new partnership with RVDA, we will use this space to fill you in on how reinsurance can drive success throughout your enterprise. You don’t have to be an expert to enjoy all the benefits of reinsurance, but you do need to know your options.
So look for more insights and advice in the weeks ahead, and in the meantime, if you would like to have a quiet, confidential conversation about reinsurance, please feel free to contact me today.
Ryan Hanlon is a managing director for Portfolio, a leading provider of reinsurance and F&I programs for RV dealers, and a 16-year industry veteran. Email him at firstname.lastname@example.org.