Real One-stop Embedded Insurance is Making Its Mark

Selling cars is a process (some say art form) that has been fine-tuned for decades. Yet virtually every deal still encounters the same pain point – insurance.

The customers find a car they like. They settle on a price. They talk to F&I about financing. But then it all comes to a screeching halt as the customer searches for insurance.

Typically, they’ll go to their traditional agent or shop for insurance online. But what otherwise would have been a smooth transaction is interrupted. The music and dancing stops.

Stop Gap Solutions

Dealers have been wrestling with this problem for years. The obvious solution is insurance offered at the point of sale. So far, their efforts have not been stellar. And for good reasons. Some of those ideas have included:

Allowing insurance agents to set up in the showroom. But buyers had loyalty to their existing agents. Sitting down with a new agent also required lots of questions and extra paperwork.

OEMs tried entering into partnerships with big, brand-name insurers. But while dealers were allowed to sell cars, in most places they were not allowed to sell insurance. That required a licensed agent. And being locked into a given carrier, these OEM-sponsored options often did not deliver when it came to price or quality.

Digital Solutions

Then came shopping for car insurance on the internet. Buyers had to switch from one insurer’s website to another, inputting the same information, again and again, and being careful to compare apples-to-apples on coverages and deductions.

In recent years we have seen the advent of digital point-of-sale platforms customers can visit while at the dealer. Instead of having to shop and compare insurance company websites individually, these platforms offer a selection of policies from various insurers at different price points and coverages. The problem with these platforms is the time it takes while the customer still needs to shop and compare. The natural inclination to choose the cheapest option could leave the customer exposed and could result in hard feelings toward the dealer should anything happen.

The I in F&I is supposed to stand for insurance. Yet to this day dealers still struggle to offer customers real insurance solutions.

But now, thanks to new technology, we have finally gotten it right – a quick and easy way for dealers to offer their customers customized, high-quality, A-rated insurance at the point of sale and at a competitive price. It’s called embedded insurance.

Embedded Insurance

How does it work? These new platforms plug directly into most dealer DMS and F&I systems. They use data already provided to the dealer as part of the sales process. That data is then augmented with additional data on driving record, accidents, number of family cars, family members, marital status, etc.

These new platforms use artificial intelligence (AI) and sophisticated algorithms to create a tailor-made policy for the customer in 30 seconds or less. We’re not talking basic, off-the-shelf, menu-driven policies, but rather high quality, A-rated car insurance customized for the individual customer. So, if they’re newlyweds, just starting out, they get a policy written just for them. If they are an established couple with lots of assets, they get a far more compressive policy written just for them. You, as the dealer, can be sure your customers get the insurance they need.

Better still, in the overwhelming majority of cases – but not always — these high-quality policies are also less expensive.

How? The short answer is no advertising costs. Marketing for big, brand-name insurers typically accounts for 10-15 percent of premium. Embedded insurers are able to pass along the savings to customers. Moreover, when it comes to financial products, studies have found customers, — especially younger, digital savvy customers — really don’t care about brands.

In the few states where these new embedded insurers are operating, the take-up rate is about 25 percent. According to J.D. Powers, more than one-third (35 percent) of auto insurance customers are interested in embedded insurance. (1) Deloitte predicts that nationwide 20 percent of all customers will buy car insurance at the dealership by 2030. (2)

The Future of F&I

Good, fairly priced car insurance at the dealer in 30 seconds or less benefits both customers and dealers. But there is another benefit to dealers: At long last the dealership finally has control of its entire sales process and its ecosystem.

For the sales department, it helps move happy customers and their new cars off the lot and frees up time for the next sale. For parts and service, many embedded insurance policies will cover OEM parts and in-house collision repair.

Embedded insurance is free to dealers. Plug it in and start selling. Depending on the insurer and what state they are operating in, embedded platforms pay dealers a sum for a completed quote or, if licensed, an agent’s commission.

Not all customers will choose embedded insurance. But good, high-quality insurance at a reasonable price in just seconds means they can drive off the lot in just one visit. They win and you, the dealer, win.

###

1. J.D. Power, April 30, 2024: More than one-third (35%) of auto insurance customers say they are interested in embedded insurance.
2. Deloitte Insights, July 27, 2023: Deloitte predicts that if as much as 20% of the US personal auto market goes the embedded route by 2030, at least US$50 billion in premiums could be diverted away from the industry’s traditional distribution channels.

Related Stories:

• Customers Interested in Embedded Insurance Opportunities
• Driving Growth: The New Frontier of Used Vehicle Acquisition and F&I’s Pivotal Role