InsuranceTech: What Is It? Why Should Dealers Care?

Dealers who are looking for new ways to build long-term relationships with their car-buying clientele shouldn’t overlook the upsides of such adjacent services as insurance and warranty protection, particularly when they’re delivered in a seamless, digital manner.

For a clearer picture of the benefits, consider this scenario: A young couple arrives at a car dealership with their toddler in tow, excited to replace their tiny hatchback with a family-sized minivan. After a few test drives, they choose a handsome used hybrid. The dealer’s F&I team steps in to handle the financing and the finance manager also introduces the dealership’s insurance services.

Noting that their current coverage will soon be up for renewal, and being interested in finding more affordable options, the couple reviews the insurance portal on the dealer’s website. They enter some data and quickly receive three competitive quotes from well-known insurance providers. They select a policy, the finance manager contacts an on-call insurance agent to bind the coverage, and in less than 20 minutes the couple’s vehicle is fully insured with coverage they prefer.

At the same time, the finance manager shares the dealership’s robust suite of warranty options and makes a few recommendations. The buyers choose a legacy vehicle service contract and theft protection. The family drives off in their newly acquired minivan, delighted with the streamlined buying process that satisfied their car protection needs. The dealership gains a new loyal customer, earning extra revenue from additional warranty sales along the way.

Happy outcomes like these are made possible by InsuranceTech, the latest digitally based innovation to enable the positive experiences today’s customers expect.

First, a quick primer: InsuranceTech is the use of technological innovations to instill more agility into the traditional insurance model. Dealers leveraging its capabilities have an opportunity to help their car-buying customers meet their protection needs more efficiently and affordably.

For example:  A plug-and-play digital platform called “embedded insurance” lets dealers provide the hassle-free experience described in the scenario above. Its positive benefits caused EY, the professional services and accounting powerhouse, to predict that in the next five years, more than 30% of all insurance transactions will take place through embedded sources.

Technology also enhances a dealer’s ability to expand revenue-growing warranty offerings to include such popular products as theft protection, scratch and dent, wheel and tire, key/remote replacement and more. By providing on-the-spot access to a broader suite of products via a third-party warranty service, dealers can augment OEM warranty products. For used-car dealers, third-party services provide a warranty service model not available through OEMs. And every customer appreciates the opportunity to learn about important protection they didn’t even realize they need.

In short: InsuranceTech supports the strategy to increase repeat business, which is top-of-mind for most dealers today. According to the 2023 Capital One Car Buying Outlook, 99% of dealers surveyed view repeat sales as important. In the same report, 76% of buyers surveyed said they would return to a dealership that provides a positive experience. And 67% of car buyers want dealers to enhance their digital tools to simplify – and expedite – the overall buying process. Imagine how InsuranceTech’s positive impact multiplies for larger regional and national dealerships.

Here are four tips to successfully tap this latest digital innovation:

Agility is key to succeeding at InsuranceTech. Instead of facing a distracting friction point in the car purchase process, dealers can provide an easy, yet comprehensive, approach to helping their customers acquire customized insurance and warranty coverage just when they need it.

A successful embedded insurance program requires qualified insurance agents to be on call during dealership business hours, including weekends. They’re needed not only to bind policies quickly but also answer complex insurance questions. Incorporating a human touch into the digital exchange adds an element of trust, which bolsters relationship-building.

Well-designed InsuranceTech solutions feature comprehensive platforms that allow dealerships to offer incremental customer services without adding staff, acquiring insurance licenses or facing additional expenses or responsibilities. Integration costs are minimal and usually there are no transaction fees. Depending on the dealership’s IT capabilities and the strength of their platform, set-up time can be completed within six weeks. 

Because buyers’ warranty needs vary, it’s fruitful to enhance OEM products with broader services from a third party. Offering warranty protection in such a fluid fashion at the time of purchase makes customers more open to additional warranty services.

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Craig C. Eagleson (pictured, left) is president and chief revenue officer of Incenter Insurance Solutions.