Putting the customer back at the centre of the process is the key to adapting to the changing Finance and Insurance environment. That was the conclusion of the F&I panel at the AADA 2019 National Dealer Convention & Expo.
F&I departments have been under siege for a few years, with inquiries by ASIC and ACCC regulatory reviews to these crucial income generators. Our panel, hosted by Chris Mandile, Director, Deloitte Motor Industry Services, and consisting of the leaders of two major finance companies and two major insurance companies, discussed the ramifications, including potential changes to Point-of-Sale exemptions.
“We have seen a very rapid decline in what’s coming into the insurance income area of the business, so for a lot of the Dealers in the room, they are actually starting to walk away from some of the insurance products,” Mr Mandile said.
Malcolm Tilbrook, CEO, Eric Insurance Ltd, said the industry needed to take ownership of its past mistakes before it could move forward.
“In understanding what the future holds for retail insurance we have to acknowledge a little bit of the past, and I think the issue that’s been evident in the past is the customer has not been put at the centre of the insurance side of F&I over the journey,” he said.
“Firstly, the construct of products and the price of products did not meet what I think fits under that banner of community expectation, and certainly didn’t fit the expectation of our regulators. So I think that led to what we’ve seen with both ASIC investigations, and ultimately it played out through the Royal Commission as well. You’ve got to put a line through the past and acknowledge the industry has done the wrong thing in that regard.
“There are a few key pointers to where the future lies. Government’s been very clear about not necessarily banning these products, but what they’ve asked the industry to do is focus on the construct of the product to make sure that features and benefits are good and valuable for the consumer. They’ve wanted us to look at the price – as in don’t overinflate the price by paying the distribution channel way too much money – and they’ve also looked at the selling processes, because they’ve looked inside dealerships and said that the process of selling insurance has been way too difficult and way too convoluted, and customers have not understood what they’re buying.
“I think the key to the future of insurance is to actually go back and do what Dealers are good at, which is to put the customer at the centre of what they’re doing. I think that’s one of the good parts about the legislation that’s coming into play now, that insurers are obliged under product design and distribution obligation, and the regulator has intervention powers. They’re effectively saying to the insurance industry, ‘produce good products and we’ll leave you alone’. And I think that’s where the future lies.”
Michael Winter, Chief General Manager, Retail Distribution, Allianz Australia, pledged Allianz would work with Dealers to help improve the customer experience.
“It can all sound a bit grim in terms of ‘how do we respond?’,” he said.
“If it’s a platform provider bringing a rideshare solution to a consumer, more often than not they’re going to build insurance as part of that service. And that’s very difficult to try and break into. Alternatively, if you think where a connected car might go, where people are talking about ‘pay as you drive’, I think we’re well-placed through assistance and we’re already doing this with some manufacturers – to be connected to the car, to provide assistance – and when that technology’s connected that opens up opportunities for us to work with Dealers, to say ‘can you sell pay as you go at your business?’, which might be more meaningful for that customer rather than standard motor insurance products.”
On the Finance side, Peter Jones, Managing Director, Nissan Financial Services Australia & New Zealand, said low rate APRs (Annual Percentage Rates) would continue to provide opportunities.
“We see there is a future in lower rates. I think it’s actually about integrating it into the whole sales process. One of the things that the low rate offers have proven is that if you drive everybody through the business manager, you get a much higher penetration. We see an uptick in sales every time we do it,” he said.
John Chandler, President & CEO, Toyota Financial Services, saw many opportunities to experiment “in terms of retention. So, targeted offers, even risk-based ideas,” he said.