Tag Archive | "insurance"

What’s Going On With GAP?

If you follow GAP, you may have noticed that many companies are seeing dramatically higher losses. What are the reasons this is happening?

First, we need to know how we got here. After the financial crisis, loss ratios were historically low, due to the combination of robust used-car prices and restrictive financing. In other words, consumers couldn’t finance much more than the car was worth and the vehicle wasn’t depreciating as fast as in the past.

This double benefit had industry loss ratios for GAP insurance below 20%. Note that industry results aren’t available for the more common GAP waiver. In 2014 and again in 2015, those loss ratios increased by a large margin, and it is likely that we will see another increase in loss ratios in 2016. Why is GAP suddenly so unprofitable?

The Used-Car Effect

The used-car market is the basis for the settlement of the physical damage and the most important factor in determining the value of GAP claim. A 1% decrease in the used-car index will imply a 6% increase in GAP claims, based on our research.

The good news is that, overall, used-car prices are at a high level and have not seen significant deterioration in the last five years. However, some segments, such as compact cars, have seen dramatic decreases. According to Manheim Consulting, the average price of a compact car has fallen 11% in the last 18 months. This type of decrease will cause a large increase in GAP severities for this type of vehicle.

Predicting the future value of used cars is difficult, but there are signs that a decrease could be coming. The increasing number of vehicle sales will increase the number of late-model used cars. This is especially a factor when leasing rates are high since the majority of these cars will be back on dealer lots in a few years. For example, industry data shows that leasing returns will increase around 40% by year-end 2018. What will this additional supply of vehicles do to pricing?

Financing Trends

Another important factor is the financing market. As lenders allow more negative equity to roll into loans, the potential gap increases. Companies should track the ratio of loan-to-vehicle value in their books. It is likely that business originated in dealerships will have wider credit swings than those generated by financial institutions.

There is some evidence of increasing loan-to-value ratios. In their Spring 2016 Semiannual Risk Perspective, the OCC specifically noted the increased risk to lenders from increased loan-to-value ratios. The impact of increasing LTVs is easy to see, since all of the increase will, at least initially, be covered by the GAP contract.

An important consideration when examining credit information is that this occurs at a time of the vehicle purchase and not at the time of the claim. So there is a delay between the credit market and the impact of GAP claims, while changes in used-car prices will impact GAP claims instantaneously.

Therefore, if the loss ratio increase is mostly on the most current business written, it might be due to financing considerations while broad based increases may point to higher frequencies, repair costs or a downturn in used car prices.

Propensity of Total Losses

All GAP claims begin with a total loss occurrence. A total loss is dependent on both a triggering event (a physical damage claim) and the determination of a total loss by the insurance company. There is evidence that both of these are on the rise. What would cause the amount of total losses to be increasing so much? This will be the subject of a feature article in a later issue.

The increase in GAP losses is due to combination of several factors, including underlying loss frequency and severity, financing and some disruption in the used vehicle market. Some of these changes may be structural, such as higher repair costs resulting in more vehicles being deemed total losses. This will not likely abate in the near term.

Used-car prices, which have remained high, are an additional concern since a lowering of used-car values would only increase pressure on the GAP market. Aggressive financing continues to be a concern as well. Those factors, along with each of the variables described above, will bear scrutiny in the months and years to come.

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GWC Warranty Appoints Marketing Manager

WILKES-BARRE, PA. – GWC Warranty, the best-in-class provider of used vehicle service contracts and related finance and insurance products sold through automotive dealers, announced the addition of Melissa Roberts as the new Marketing Manager.

As a member of the Marketing Department, Roberts will be responsible for developing and implementing a comprehensive customer strategy focused on engaging and retaining GWC partners by designing a customer experience aimed at helping them sell more cars and increase profitability.

Roberts brings to this role nearly a decade of experience in research and analytics for international business-to-business manufacturer, InterMetro Industries in Wilkes-Barre, Pennsylvania. She most recently held the title of Product Manager, Data & Services, responsible for developing and managing the company’s portfolio of extended warranties and service contracts.

Having graduated summa cum laude from the University of Pittsburgh in 2006, Roberts is also an accomplished project manager having received training in Risk Management and Project Management from Pennsylvania State University.

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GWC Warranty Surpasses $400 Million in Claims Paid

WILKES-BARRE, Penn. – GWC Warranty, the best-in-class provider of used vehicle service contracts and related finance and insurance products sold through automotive dealers, has successfully topped $400 million in claims paid to date.

GWC Warranty’s $400 million in claims paid, combined with sister-company EasyCare’s $3.1 billion, brings the APCO Holdings, Inc. claims paid total to more than $3.5 billion.

“Surpassing $400 million in claims paid is an important milestone for GWC and our dealers as well,” said Rob Glander, CEO and President of GWC Warranty.  “By partnering with an organization that has totaled more than $3.5 billion in claims paid, dealers who sell GWC service contracts can rest assured that we’ll stand behind it. And their customers can enjoy their vehicles knowing that if a breakdown occurs, GWC will be there to get them back on the road quickly.”

This new claims paid milestone is the latest accolade for GWC Warranty, which is a Motor Trend® Recommended Best Buy for Independent Dealers and rated A+ by the Better Business Bureau. Since 2015, GWC has been designated a Bronze Level National Corporate Partner of the NIADA. For the past two years, GWC has also been recognized in both SubPrime Auto Finance News’ SubPrime 125 and Auto Remarketing’s Power 300.

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Easycare Appoints Rob Mirra as National Director of New Business

Norcross, Ga. – EasyCare, the leading independent provider of automotive ownership benefits and dealer services that help dealers create more passionate employees and customers, has appointed Rob Mirra as National Director of New Business Opportunities. Mr. Mirra will be leading the building of new EasyCare relationships with dealerships across the nation who are interested in creating a better experience for their employees and customers, and driving more opportunity for success in every area of the dealership that touches the customer.

“Rob has a unique way about him that truly engages people. The relationships he builds last for years and we are excited to bring his special personality and talents to the EasyCare family. People engage with Rob because of his direct and honest approach, and his intense desire to help others succeed. Rob’s a perfect fit for our culture here at EasyCare” said Larry Dorfman, CEO of EasyCare.

Mirra brings with him over ten years of automotive experience. Having worked through the ranks as a sales person, F&I Manager, General Manager and owner of dealerships, he’s gained comprehensive insight into the industry on a grand scale. Prior to joining EasyCare, he was Executive Manager and Partner at Henderson Hyundai, and before that National Sales Director at Hyundai Capital America where he was primarily responsible for insurance, commercial credit and finance.

Mirra has served the public for many years as a veteran of the US Army and as a police officer for the Newport News Police Department.

“What I’m mostly excited about working at EasyCare is that we’re introducing a completely different approach to working with dealerships. Finance and insurance doesn’t start in the F&I office anymore. It starts at the first contact with the customer. Our business is more of a partnership and we help dealers engage their customers at every touch point. It’s a lot more personal,” said Mirra. “It’s important to continuously seek out new ways to fulfill the needs of our dealers and provide the most positive experience for their employees and their customers.”

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Dealer Service Solutions Selected for F&I Partnership with Volvo Retailers in the Carolinas

RALEIGH, NC – Dealer Service Solutions, a fast growing full service automotive finance and insurance agency, has been appointed the new authorized representative for all Volvo retailers located in North and South Carolina. Dealer Service Solutions was chosen for this role by Warrantech, an AmTrust company located in Bedford, Texas, who will be assisting with the transition.

Dealer Service Solutions specializes in providing F&I products, services, training, and customization programs for franchise and independent automotive dealerships as well as franchise motorcycle dealerships. “We are honored to be selected for this F&I partnership with Volvo,” said Gary Powers, President of Dealer Service Solutions. “Our team is excited to utilize our years of automotive experience to serve the regional Volvo retailers and bring greater value to their F&I departments!”

Volvo has been undergoing a complete brand makeover, rolling out innovative designs such as the XC40 and the S40 concepts. Volvo has had 10 consecutive months of double digit sales growth and YTD sales are up 22.7%. This is all before the new and highly anticipated S90 hits the market this summer. Volvo is focusing on the needs of urban millennials who are looking for an alternative to more mainstream luxury brands.

Dealer Service Solutions is also riding high with a 200% increase in business over the last 3 years. “Our administrative partners have been a huge reason for our success” said Powers. “They continue to support our creativity in the field by allowing us to customize individual programs for our dealers. Having the ability to be flexible with various F&I products allows our dealers to target their core customer base and their individual needs offered in the F&I departments.” This partnership should provide both Dealer Service Solutions and the Volvo retailers the ability to prosper in the F&I area and continue their tremendous growth.”

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Safe-Guard Appoints Finance & Insurance Leader Scott Ashby as GM of Canada

ATLANTA – Safe-Guard Products International announced that Scott Ashby has joined the company as General Manager of Safe-Guard Canada, Ltd.

“I am pleased to welcome Scott to the Safe-Guard team as General Manager of Canada,” said David Pryor, CMO of Safe-Guard. “His role will be vital to servicing our Canadian clients and their dealers as well supporting the next stages of growth within our company.”

With over 15 years of experience in finance and insurance, automotive product development, operations management, and automotive retail, Ashby’s experience and knowledge will serve the growing Canadian finance and insurance market well. Most recently Ashby was Aftersales Program and Operations Manager for Nissan Motor Corporation and National Manager of Nissan Canada Extended Services, Inc. which offers financial and insurance products to Nissan and Infiniti dealers across Canada.

Safe-Guard Canada has been serving Canadian customers since 2001 and operates a state-of-the-art facility in Mississauga for their call center and operations management and sales training. Safe-Guard Canada supports clients such as Harley-Davidson Financial Services, Honda Financial Services, Mercedes-Benz Financial Services, Nissan Canada Extended Services, Inc., Porsche Financial Services, and North American Automotive Group as well as their dealers across Canada. With continued growth in the Canadian automotive industry, and increased focus from auto dealers on Finance & Insurance (F&I) products, Safe-Guard Canada saw contract volume grow over 70% in 2015 and is poised to support clients with another successful year in 2016.

“We continue to see growth in the Canadian market,” said Pryor. “Our existing clients are adding new products and solutions, dealers are seeing success with branded programs supported by training and sales support, and consumers continue to demand care-free auto protection. We’re excited to support clients and their dealers with a complete finance and insurance solution.”

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