Analyzed Insurance

Don’t be surprised if your car salesman tries to sell you insurance, too. Car dealerships and auto manufacturers could see a major boost in revenue when they sell insurance products to car buyers. A new study from Finaccord, a financial market research group, found that when auto dealerships and manufacturers sell things like auto insurance, extended warranties, GAP insurance and roadside assistance, they can experience a profit increase.

“Across 26 countries, dealers sold policies to consumers worth an estimated at €16.8 billion [$22.8 billion] in revenue in 2010, which is the equivalent of 4.6 percent of the underlying value of the new and used cars that they sold to retail customers, across six financial services,”  the report showed according to Insurance Journal. “Insurance, warranty and assistance services are especially valuable to the automotive trade because policies last for more than one year, and in the case of motor insurance can be renewed as long as the customer owns the car,” Finaccord consultant David Parry commented to Insurance Journal. “This helps to smooth out the peaks and troughs in car sales themselves. Because most policies are multi-year or get renewed, 70 percent of this revenue came from policies in force at the start of 2010, while the remaining 30 percent came from policies sold in 2010 itself.”

In countries like Russia, selling this products have resulted in billions worth of premiums sold. In Germany figures are even higher according to the report. Finaccord says that about $1.6 billion of gross premiums came about through the auto industry. “Insurance, assistance and warranty products are very important to manufacturers and importers as well as car dealers,” Parry told Insurance Journal. “Dealers often use the official partner of their manufacturer brands only for these financial services, whereas they may have one or two independent providers for finance and leasing contracts as well. Because there is less competition through this channel, dealers, manufacturers and importers can benefit from higher margins, which can be essential when the car market itself is so highly competitive.”

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