10 Questions to Ask During your Next Cession Statement Review
10 Questions to Ask During your Next Cession Statement Review
Many dealerships are unclear on what it costs them to do business with their F&I provider. Unlike insurance and floor plan expenses, F&I expenses do not appear on the monthly financial statement, however that does not mean they do not exist. The average loss to a dealer in reinsurance is about (30 %) of each VSC in fees absorbed by their F&I provider in the form of Admin Fees, Ceding Fees, Loss Adjustment Expense, Premium tax and even “undisclosed” charges. These fees can oftentimes be ($300+/- figure) per contract.
Even for those dealers that have had a relationship with a “trusted” advisor spanning decades; it is worth a health examination of fees versus premiums and a few insightful questions.
Dealer group goals, store acquisitions, remodels and tax law changes are just a few of the things that can affect your reinsurance position and there is a lot to keep in mind.
Head into your next cession statement review prepared with a thorough set of questions.
1 | Am I in the right structure for my current situation and why? (CFC, NCFC, DOWC, RETRO, etc)
This is not something you should simply set and forget. As needs and priorities change over time this question is designed to ensure your current goals are aligned with the structure you are in. Each structure can be optimized for a specific set of needs and priorities to include but not limited to future acquisition, access to capital, tax optimization, generational/wealth transfer, etc.
2 | What is my current admin fee and what was it when I started?
There is no right or wrong answer here, it is something that you need to be aware of.
3 | Do I have a floating admin fee or how often does it go up?
Have this explained to you in detail and the specific reasons and/or services that correlate to creating the float up or down.
4 | Do I have a ceding fee, what’s the percentage, and what’s the average per contract?
Insert answer here.
5 | What other fees do I have? (claims fee, management fee, inspection fee, etc)
Be sure to communicate that you want to know of all fees and what they represent.
6 | When was the last time our contract costs were repriced and were they priced to my market or a national rate?
Depending on the answer, simply ask why? Let them explain and give as many details as possible.
7 | What are the loss ratios for each service writer and not just the dealership?
This is an important statistic to know from a service department profitability perspective, but also from a management and training perspective.
8 | Has the warranty admin company enhanced our inspection process to reduce claims shortly after the car is sold?
If the answer is no, ask how this might be something that could be considered and implemented. If the answer is yes, ask them to review the process and exactly what occurs.
9 | What’s the average wait time when calling in a claim currently for my dealer group?
This is important to know for the overall success of your reinsurance. The answer to this question impacts employee productivity, CSI and customer retention.
10 | Are my fees different if I receive F&I training or not?
If the answer is yes, ask by how much. Then ask for a thorough explanation of what exactly the training involves (i.e. times it will occur, who and how many people will be involved, what material and skills will be reviewed) ** It is important to know what level of training you feel you are getting from your current fee structure (if any) for comparison purposes, as well.
**During this discussion it is extremely important to ask about the company itself as there have been numerous mergers and acquisitions, and you should not assume that because you are already in one structure that there is not a specific reason you should be considering another.
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