Dealer receives a fixed dollar amount per contract sold. Structure designed to maximize cash flow in the current period.

1+/Commission programs are designed to incentivize dealerships to sell more of the provider’s F&I products. In this type of program, the dealer receives a flat fee, or “base rate”, for selling the first F&I product. For each additional product sold, the salesperson receives a commission, usually a percentage of the product’s price.

A company that may be taxed under Internal Revenue Code § 831(b), which provides that a captive qualifying to be taxed as a U.S. insurance company may pay tax on investment income only in any year that its written premium is at or below the threshold for the applicable tax year.

A 831(b) automotive company is a type of captive insurance company that specializes in providing insurance coverage for the automotive industry. Captive insurance companies are created by businesses to provide insurance coverage for their own operations and to take advantage of tax benefits.

Under Internal Revenue Service (IRS) Code 831(b), a captive insurance company can elect to be taxed on a portion of its premiums rather than its full taxable income. This allows the company to pay lower taxes and have more financial flexibility.

831(b) automotive companies offer a wide range of insurance coverage for the automotive industry, including liability coverage for auto dealerships, product liability coverage for auto manufacturers, and coverage for rental cars. They can also offer coverage for areas such as cyber liability, environmental liability, and workers’ compensation.

Advantages of using a 831(b) automotive company include:

1. Access to broader insurance coverage options: 831(b) companies can design insurance policies specifically tailored to meet the needs of the automotive industry.
2. Lower costs: By being taxed on a portion of their premiums, 831(b) companies can offer lower insurance costs than traditional insurance companies.
3. More control: As a captive insurance company, a 831(b) automotive company has more control over the design and pricing of its insurance policies.
4. Improved risk management: By having insurance coverage designed specifically for their operations, automotive companies can improve their risk management strategies and better protect themselves against potential losses.

 In conclusion, a 831(b) automotive company is a valuable option for automotive businesses looking to access broader insurance coverage options, lower costs, and improve their risk management strategies. It is important, however, to thoroughly research and understand the advantages and limitations of this type of insurance company before making a decision.

An addendum number in automotive retail refers to a document that is added to the original sales contract to make changes or additions to the terms and conditions of the agreement. The addendum number serves as a unique identifier for the document, allowing the dealership and the customer to easily track and reference any changes made to the original contract.

Addendums are commonly used in the automotive retail industry to update the contract in response to changing circumstances, such as changes in the customer’s financing options or the availability of certain vehicle features. By using an addendum number, dealerships can maintain an accurate and complete record of all changes to the sales contract, helping to ensure that the terms of the agreement are properly followed and understood by all parties involved.

Affiliated Reinsurance Company (ARC) is a term commonly used in the automotive industry to describe a company that is affiliated with a car dealership and provides reinsurance for the dealership’s finance and insurance (F&I) products.

Reinsurance is a process of transferring a portion of risk from one party (the dealership) to another (the ARC). By doing so, the dealership can reduce its exposure to losses and increase its profitability. The ARC, on the other hand, assumes the risk and manages it on behalf of the dealership.

Specific Training and highest level of “certification” from National Independent Automobile Association.

The Certified Master Dealer program (CMD) is a comprehensive training and accreditation program that focuses on all aspects of dealership operations, including sales, service, parts, and finance and insurance. The program is designed to help dealerships improve their overall performance and customer satisfaction levels, while also increasing profitability.

One of the key benefits of the CMD program is the training it provides to dealership personnel. The program covers a wide range of topics, from sales and customer service to financial management and ethical practices. By participating in the program, dealerships can ensure that their employees are knowledgeable and equipped to provide customers with the best possible experience.

Another important aspect of the CMD program is its emphasis on continuous improvement. Dealerships that participate in the program are required to regularly evaluate their operations and identify areas for improvement. This focus on continuous improvement helps dealerships stay ahead of the competition and maintain a high level of customer satisfaction.

A CLIP is a commercial insurance product that covers the contractual obligations of the insured (always a commercial entity)

Automotive Contractual Liability Insurance Company (CLIP) is a type of insurance policy specifically designed for the automotive industry. This insurance coverage helps protect automotive companies from financial losses that may arise from contractual obligations.

A typical CLIP policy may include coverage for product liability, breach of warranty, and indemnification for third-party claims. This type of insurance helps automotive companies meet their contractual obligations and protects them against unexpected expenses that may arise from liability claims.

When entering into a contract with another party, it is important to consider the potential financial risks involved. CLIP insurance helps mitigate these risks by providing coverage for potential claims and helping to cover the costs associated with defending against such claims.

In the highly competitive automotive industry, CLIP insurance can be a critical component of a company’s risk management strategy. By providing a safety net against unexpected liabilities, CLIP insurance can help companies maintain their financial stability and pursue new business opportunities with confidence.

Overall, CLIP insurance is an essential tool for automotive companies looking to manage their contractual risks and ensure their long-term success. By providing protection against a wide range of potential liabilities, CLIP insurance helps automotive companies operate with greater peace of mind and focus on their core business operations.

.A Controlled Foreign Corporation (CFC) is a type of foreign corporation that is owned or controlled by United States taxpayers. In the context of Automotive F&I (Finance and Insurance), a CFC can refer to a foreign subsidiary of a U.S. auto manufacturer or dealer group that provides finance and insurance products and services

In this structure, the dealer participates in underwriting and investment income generated by contracts sold via ownership of a foreign reinsurance company.

Dealer combines Retrospective Commission, CFC, and NCFC structures to meet specific personal and/or business objectives.

Customer Service Index (CSI) is a key metric used in the automotive retail industry to measure customer satisfaction. This index is based on the results of surveys that are conducted with customers after they have purchased a vehicle or had service work done.

The purpose of the CSI is to provide car dealerships with valuable feedback on how they are performing in terms of customer service. The information gathered from CSI surveys can help dealerships identify areas where they can improve their customer service and, in turn, increase customer satisfaction and loyalty.

There are several benefits of using the CSI in automotive retail, including:

• Improved customer satisfaction: By measuring customer satisfaction and using the results to improve customer service, dealerships can increase customer satisfaction and loyalty.
• Increased sales: Happy customers are more likely to recommend a dealership to others and return for future business, leading to increased sales.
• Better reputation: A high CSI score can help dealerships build a positive reputation and establish themselves as a leader in customer service.
• Actionable insights: CSI results provide dealerships with specific, actionable insights into what they are doing well and what they need to improve, enabling them to make meaningful changes to their customer service practices.

In order to maximize the benefits of the CSI, dealerships should ensure that their surveys are conducted professionally and accurately. Dealerships should also make a concerted effort to follow up with customers and address any issues or concerns that are raised in the surveys.

Dealer-Owned Warranty Company is a type of provider of vehicle service contracts that is typically owned and operated by an automotive dealership or dealer group. Dealer Owned Warranty Companies offer extended warranty coverage and other service contracts to customers who purchase new or used vehicles from the dealership.

Compared to third-party service contract providers, a Dealer Owned Warranty Company is controlled and owned by the dealership, which allows for more flexibility in pricing and coverage options. In addition, Dealer Owned Warranty Companies can be better integrated with the dealership’s service department, resulting in a smoother customer experience when it comes to submitting and processing claims.

Dealerships may choose to transition to a Dealer Owned Warranty Company if they want to have more control over their warranty program and potentially increase their profitability. With a Dealer Owned Warranty Company, the dealer owns the warranty company and can customize coverage, pricing, and claims processing.

There are potential tax benefits associated with Dealer Owned Warranty Companies. For example, the dealership may be able to deduct the cost of warranty claims as a business expense, which can help to reduce their taxable income. Additionally, the dealership may be able to depreciate the cost of the warranty over time, which can also help to reduce their taxable income.

Moreover, Dealer Owned Warranty Companies may be eligible for certain tax credits, such as research and development tax credits, which can offset the cost of offering the warranty and provide a financial benefit to the dealership.

It is worth noting that the tax benefits of Dealer Owned Warranty Companies can vary based on the individual circumstances of the dealership and the warranty program. As a result, dealerships should seek the advice of a tax professional to determine the potential tax benefits of a Dealer Owned Warranty Company for their specific situation.

This is a clause in the contract that stipulates the vehicle owner return for service to the dealership that sold the contract. This is typically a mileage based clause.

This is the amount of money stipulated in the contract that the customer would pay “out of pocket” to have the repair completed.

Downstream revenue is not the revenue earned at the initial encounter, but the revenue that arises from providing additional services at a later time throughout the organization

Premium collected by the insurance company for the portion of a policy that is expired.

An earned surplus is the amount of funds generated by a business and which were retained within it, rather than being paid out to investors.

Facultative reinsurance is coverage purchased by a primary insurer to cover a single risk—or a block of risks—held in the primary insurer’s book of business. Facultative reinsurance is one of two types of reinsurance

This is considered the “back-end” of dealership operations and typically includes service, parts and body shop operations.

Dealer receives a commission for selling a contract

Coverage that pays the difference between what your vehicle’s worth and how much you owe on your car at the time that it is stolen or damaged.

IPS contains specific rules and limitations regarding how the required reserves in your reinsurance account can be invested

Loss, Inspection, Pricing Analytics Review. To be most effective, these reviews should be conducted on a monthly basis.

The Reinsurer only pays the Ceding party for all losses incurred during the reinsurance contract period, regardless of when the policy’s insurance generated the losses.

The ratio of total losses paid out on claims versus the total of premiums earned in the same time period

Sales methodology used to present different products that can be sold in conjunction with the purchase of your vehicle.

In the context of Automotive F&I, a non-controlled foreign corporation (NCFC) reinsurance refers to a business arrangement where a U.S.-based automotive dealership or F&I provider establishes an offshore insurance company in a foreign country, which is not controlled by the dealership or provider. This offshore company is set up to act as a reinsurer for the dealership or F&I provider’s service contract or vehicle protection product sales.

The offshore NCFC reinsurance company can receive premiums from the U.S.-based dealership or provider, which are then used to pay out claims on the service contracts or vehicle protection products sold by the dealership or provider. Since the offshore reinsurance company is not controlled by the dealership or provider, it may be subject to more favorable tax treatment and regulatory requirements than a domestic insurance company.

In this type of arrangement, the U.S.-based dealership or F&I provider can benefit from potential tax savings, including the ability to defer taxes on the income generated by the offshore reinsurance company until it is repatriated to the U.S. Additionally, the NCFC reinsurance company may also provide an opportunity for the dealership or provider to earn investment income on the premiums paid to the offshore entity.

It is worth noting that non-controlled foreign corporation reinsurance arrangements can be complex and require careful consideration and planning by the dealership or F&I provider. Moreover, there may be regulatory and tax implications associated with these arrangements that require guidance from legal and tax professionals.

Non-proportional Reinsurance — also known as excess of loss reinsurance. Losses excess of the ceding company’s retention limit are paid by the reinsurer, up to a maximum limit. Reinsurance premium is calculated independently of the premium charged to the insured.

A person or entity who is legally or contractually obliged to provide a benefit or payment to another

Finance or lease reserve and the profit from F&I products. Also known as: Per Retail Unit (PRU) Per Vehicle Revenue (PVR)

Definition: Per Vehicle Retail (PVR) is a term used in the automotive industry to describe the estimated value of a vehicle at the retail level. This value is determined by taking into account various factors such as the make and model, age, mileage, and condition of the vehicle.

Purpose: PVR is used to determine the estimated value of a vehicle when it is sold at retail to a consumer. This value is used by dealerships, lenders, and insurance companies to determine the value of a vehicle for financing, trade-in, or insurance purposes.

Factors affecting PVR: The value of a vehicle is affected by a number of factors, including the make and model, age, mileage, and condition of the vehicle. Other factors that can impact PVR include the vehicle’s history, such as accidents, services, and ownership history.

Importance of PVR in the automotive industry: PVR is an important metric in the automotive industry as it provides a benchmark for determining the value of a vehicle. It helps dealerships, lenders, and insurance companies to make informed decisions about the value of a vehicle and helps consumers to understand the value of their vehicle for trade-in or insurance purposes.

Determining PVR: PVR can be determined by using various methods, including market analysis, industry data, and historical sales information. Additionally, online tools and services are available to help estimate PVR based on a variety of factors.

In conclusion, Per Vehicle Retail (PVR) is an important metric in the automotive industry that provides an estimate of the value of a vehicle at the retail level. Understanding PVR can help dealerships, lenders, and insurance companies to make informed decisions about the value of a vehicle, and can help consumers to understand the value of their vehicle for trade-in or insurance purposes.

A proportional reinsurance agreement, also known as “Pro Rata” reinsurance, obligates the reinsurer to share a percentage of the losses. The reinsurer receives a prorated share of the insurer’s premiums. For example, a proportional reinsurance agreement may require a reinsurer to cover 60% of losses

Dealer receives a retrospectively-rated commission based on the underwriting performance of contracts sold. Includes investment income.

Ratio between net income and investment.

A risk transfer is an agreement between the insurance and reinsurance company. The insurance company will pay the reinsurance company to take responsibility for handling specific losses that may occur.

The purpose of risk sharing is to spread the risk among those involved. The principal, or direct, insurer may pass on some of the risk to another insurance company, which, in this role, is called the reinsurer. In doing so, the direct insurer is purchasing insurance from the reinsurer.

Stop-loss insurance is insurance that protects insurers against large claims. Stop-loss policies take effect after a certain threshold has been exceeded in claims.

Extra fee, charge, or tax that is added on the cost of a good or service, beyond the initially quoted price.

Also known as obligatory reinsurance, treaty reinsurance establishes an agreement between the primary insurer and the reinsurance company. With treaty reinsurance, primary insurers cede certain risks and reinsurers assume them.

The profit that an insurance company earns after paying out insurance claims and expenses

Premium amount the corresponds to the time period remaining on an insurance policy.

Unearned surplus means surplus not part of earned surplus. It means the total amounts allotted to shares in excess of stated capital

Presenting F&I products to customers via video conferencing

This number is 17 digits long and specifically identifies your vehicle.

A vehicle service contract, also known as an extended auto warranty, is a type of agreement between a vehicle owner and a provider that offers protection for certain repairs and services for a specified period of time. The purpose of a vehicle service contract is to help cover the cost of unexpected repairs that may arise after the manufacturer’s warranty has expired.

Vehicle service contracts can vary greatly in terms of coverage, cost, and length. Some contracts may cover only specific parts of the vehicle, while others may cover almost all parts and systems. The cost of the contract is usually based on factors such as the make and model of the vehicle, the age of the vehicle, and the length of the contract.