Tag Archive | "credit insurance"

An Interview with Tony Wanderon

Tony Wanderon is a serial entrepreneur, a former agent, current chief executive of National Auto Care and a private pilot. Agent Entrepreneur caught up with Wanderon to discuss his automotive industry career, what it takes to be a great agent and why parachutes are overrated.

AE: Tony, where are you from and how did you get into the car business?

Wanderon: I was born in Miami. I grew up there, went to school there, met my wife, Christine, there, had kids there, built a company there and then sold that company to American Heritage Life. My dad and grandparents were in the car business. I started when I was 12, in the used-car get-ready department, washing cars and starting them up.

AE: Did you take over your family’s operation?

Wanderon: I worked there through high school and then went to college for two years. I didn’t finish. I started bartending and making good money and it was hard to make it to class. So I worked in restaurants until I was 22, then I got back into F&I at the Chevy dealership that my father was the GM at.

In 1986, I was approached by Rick McMahon, who owned an F&I development company called ERJ Insurance Group. The dealership where I worked sold his warranty and credit life products. As Rick was growing his F&I business, he offered me a job to help him with a new relationship he started with Avis Car Sales, which required him to help open and train F&I in over 200 locations around the country.

AE: What did McMahon see in a young Tony Wanderon?

Wanderon: I think it was probably my desire, my understanding of and love for the business and how I presented myself. And I think he got me at a pretty fair price.

AE: Did you enjoy training?

Wanderon: The training part was fun. That went on for my first three years. In 1989, my son, Spencer, was born. I flew home from a two-week training trip in L.A., Hawaii and Seattle, and Christine had Spencer the night I got home — a month early, by the way. That’s when I came to the decision it was time to start building a business in South Florida, so I could be with my family more.

From 1990 to ’96, we focused on the South Florida market and, over time, we pretty much owned the market. We grew so fast. We soon had over 100 dealers, both big and small. In addition, I found a product that no one really had ever marketed and we put a lot of focus on developing and offering GAP under our ERJ brand. Around that same time, one of my first and best dealers, Dick Assmar, promoted us to his fellow Nissan dealers, which allowed us to grow that market. He also introduced me to the regional VP at Nissan and told them they should hire us to help them with Security+Plus, which we started in the early ’90s and continues today. I still feel that I owe much of my success to Dick for the way he supported me and our company.

That Nissan relationship brought us into national growth mode. We were writing 15,000 to 20,000 GAP policies a year as an administrator. In addition, our development business was growing at over 30% per year. At the peak of that growth, we became an American Heritage Life (AHL) agent. After a presentation I did for a large dealer group, the chairman of AHL, who had attended, came to me and said he wanted to acquire ERJ. Selling was not something that we were looking to do, but in 1997, it was the right time with the right company, so we sold.

Two years later, Allstate Insurance Company bought AHL for its workplace products. I really do not think that our division had any influence, one way or another, when they bought AHL, but I thought it was a great opportunity to prove that our business was a great one for them as well. For the first two years after Allstate, I remained in Miami, running ERJ. In 2001, I was asked to become president of the division. I accepted and relocated to Jacksonville.

AE: I remember when you left Allstate. It was a big surprise.

Wanderon: I like to say I’ve been married for 29 years and that was my only divorce. It was great to have a brand and I built that division and that company with a great team. I learned a lot and met some great people, but I would never go back to working in that type of environment again. I’m into an entrepreneurial, fast-moving organization.

AE: So you started Family First Dealer Services.

Wanderon: My sister, Courtney, and I started it in the dining room of my house. We hired our first employee and pretty soon there were five of us. We were doing a lot of consulting work and generating a lot of business, but our goal was to get back into being an agent-centric product provider. With my long history and clear success with GAP, we focused on that first and introduced our FFDS GAP in 2012. That year, I think we did less than $15 million in sales — which we were pound of — but in 2015, we exceeded $100 million and we now employ more than 100 people.

AE: How did the merger with National Auto Care come about?

Wanderon: In 2013, an opportunity presented itself with Trivest Partners. They had acquired National Auto Care, then known as NAC, and asked if I would go up to Ohio and give them my opinion of the organization. My opinion was this: Here was this company with some great people that really made me feel at home when I was there. They were also a very solid, customer-focused team, and that excited me. Finally, it opened my eyes to the fact that FFDS was missing an important product segment in vehicle service agreements.

NAC was missing some key things as well, but I knew that FFDS could fill in those blanks and that, together, we could both grow and support our agents better, now and into the future. So in November of 2013, we merged our two companies. As I said previously, our growth has been great and our agents have been amazing in supporting us the past few years.

Now, coming from where I came from, this isn’t “big.” It still feels like a family deal, but it is much more than that. And part of that is we have great agents who have been instrumental in our success. Our culture here is to not have as many agents as possible; it’s about having 50 great agents, one in each state and maybe two in the larger states. Unlike many of our competitors, we don’t compete directly with our agents. We’re here to build those partnerships. Having worked as an agent myself, providing that commitment and support probably means more to me than most.

AE: Is the industry’s perception of agents changing? When the magazine and Agent Summit launched, there was a lot of talk about shaking off the image of the guy driving from store to store with a trunk full of products. You don’t really hear about that anymore. The focus is on business development, F&I training, compliance and reinsurance.

Wanderon: There have always been great, good and not-so-good agents. I think that one of the qualities of a great agent is clearly understanding who they work for and that profits are reciprocal. Dealers rely on their agents to help them keep their businesses growing. A lot of the guys who worked for Pat Ryan are super-successful agents because they were part of a very professional training and support organization, and that is how we ran our agency as well.

In addition to training, back when I started, there used to be two or three products and maybe 10 to 15 companies marketing them. Now there are 50 or more products from which dealers can choose and hundreds of administrators and providers. Great agents understand the value that each product has to the dealer, the customer and the agency. Those not-so good agents frustrate me because all they do is sell price, which just hurts everything we have done to advance the industry’s reputation.

But we have to hold people and each other accountable. At the conference, we — and I mean everyone — is training and educating each other. That, I think, has been the greatest benefit of the conference. We really started to bring people together to share good, quality information. When you see other agents outside of the competitive environment, you see them in a different light.

Look at Joel Kansanback and Bill Kelly at Automotive Development Group. In 2015, they were our agency of the year. They were also my agent of the year with my prior company seven years before. Today, they are 10 or 20 times bigger, but they’re still providing quality service, that’s something special when you grow that much and keep up that high level of service. At the conference, other agents can go up to them and say, “How did you get here? How can I do that?” And they will tell you. That’s progress. It was not as open as it is today.

AE: Those are good guys. I think they would be helpful, and I think they would say it’s a good time to be in the industry.

Wanderon: It’s a challenging time. You have to do something to separate yourself. How do you compete against corporate jets, private yachts and big brand names? You show the dealers why all of that costs them money without any return. From my perspective, you can separate yourself by providing great service that fits the dealer’s needs and being persistent.

I once called on a dealer who said, “All you guys are pestering me to buy something. Come back after a year. If you’re still around, I’ll buy something from you.” I did go back. He didn’t remember me, but he kept his word. I signed him up for our warranty business. Persistence pays.

AE: You mentioned there used to be only two or three F&I products, one of which was credit insurance. In our last issue, we interviewed agents and providers who are still having a lot of success with it. The voice of dissent was Brian Crisorio at UDS. He agreed it could be valuable but said there are too many other good products out there to make a hard push for credit insurance.

Wanderon: Credit life and disability can be a great deal for the customer, particularly at a certain point in your life. But for dealers, licensing is an issue, and it is expensive, at least compared to other products. It makes a massive impact on customers’ payments. And I think it was regulated down to the point of being a challenge.

We wrote a lot of credit insurance, but personally, I’m more on Crisorio’s side. There are a lot of options outside the F&I office for customers who are underinsured. But some customers need it, and that’s why you have the menu. You don’t have to force them to buy anything.

That’s what excited me about GAP. I saw a product that would take care of the bank’s negative equity position, keep the customer from going upside-down and protect the dealer’s brand. Which one would I like to have personally? Clearly, GAP, and that’s what it often comes down to.

AE: Do you believe Millennial car buyers make good F&I customers?

Wanderon: I don’t look at someone and say, “You’re 20 years old. You’re different.” I say, “Are you smart or not so smart?” Our job is to offer the products that are going to help them. The service contract is a good example. How can a young customer afford a $2,000 or $3,000 repair when they’re struggling to make their monthly payments? And it has to be affordable. Can they afford another $10 a month? Probably. Could they afford $60 a month? Maybe not.

I don’t know why anyone would be afraid of an educated younger person who has questions. You need to offer products not for your own commission, but because the customer really needs them. If you can explain why, you have an opportunity.

AE: Indeed. Last question, Tony: What do you like to do in your spare time?

Wanderon: I fly. I’ve been working on it for a while. I got my license and bought the plane two years ago. We use it for short trips to visit family. I’ll fly up to Ohio once in a while, too. I like flying because it teaches you discipline. You have to go through your checklists and make sure everything’s right.

AE: What kind of plane did you buy?

Wanderon: It’s a Cirrus SR22. You may know it as the plane that has a built-in parachute. The former CEO of Walmart made a parachute landing last year. I guess it’s nice to have if something goes wrong, but you can’t get too comfortable up there. If you like the parachute because it gives you a false sense of security, you shouldn’t have it.

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What Do You Mean, No Credit Insurance?

I recently bought a car and I decided to finance the car through the dealer because of the great rates that were available. The dealer was financing me through a Credit Union I’ve been a member of for years. After some negotiation with the F&I manager, (you know, deciding how much I’d let him make), I added GAP and a service contract to my loan. Then I told him to be sure to add Credit Life. It’s a no brainer for anyone over 50 years old. Credit Life is a good buy for older buyers because the premium isn’t inflated by age. It’s certainly the cheapest term insurance I can buy.

But I was shocked when the F&I manager said “I’m not allowed to sell credit insurance”. Now, since the dealer was financing me through my own Credit Union, I can just as well walk into my local branch and get the same rate the dealer gave me. I was just letting the dealer get a flat fee, make a little money on the deal, and save a trip to the Credit Union.

But since the dealer doesn’t sell Credit Life, if I wanted it, (and I did), I would have to refinance the loan directly with the same Credit Union. Of course, if I were a normal customer who went to the Credit Union, the dealer would lose the finance income, GAP, and almost surely the service contract.

Now, I understand that service contract sales are the main focus of most agents, and every dealer has the right to offer what they choose. And licensing can be an added chore. But not having a product available that many customers clearly will buy misses an additional profit opportunity.

Since the “big box” F&I product providers have stopped underwriting Credit Insurance, they focus mainly on service contracts. That’s where they make their money so that is where they focus their processes and training.

Are customers still buying Credit Insurance?

The short answer is yes, and some by fairly impressive numbers. Certainly, our monitoring of many of the country’s top performers shows some impressive penetrations of Credit Insurance sales.

But it can depend on who you ask and where you are. In some states, California, New York, and maybe a couple of other states, state regulations have made the product so expensive, cumbersome, or unprofitable for the dealers they don’t offer it. But in Texas, the Midwest, Northeast, and much of the West, it is still quite popular.

Isn’t Credit Insurance too expensive these days?

Not when you analyze the risk it covers. GAP, for instance covers the difference between the insurance company’s settlement and the payoff. And service contracts pay only for repairs. Credit insurance, however, has the potential to pay off the entire loan. And when you analyze the amount paid out in claims, Credit Insurance gets used.

The premiums charged for credit insurance are set by the states insurance departments. Their calculations are usually determined by loss ratios, in other words, how much premium is paid out in actual claims to consumers. They look at how much the insurance company pays out, allow reasonable fees and commissions, and set the price accordingly. One advantage of that process is that there’s no chance of discrimination or “disparate impact” when the state sets the premiums.

You might be surprised at how many claims get paid to people who find they really need the coverage. Here are a couple of actual comments from a claims survey conducted by a major Credit Insurance Company recently:

“My husband was diagnosed with Stage 4 lung cancer in Jan. and passed in Sept. this year. This insurance was very helpful”.

“After my disability I was able to keep my car and motorcycle. Thank you for this help. It took a lot of stress out”.

They get hundreds of those kinds of comments from customers.

Won’t that big payment bump affect the sales of other products?

Believe it or not, offering Credit Insurance with our Package Option™ process actually increases service contract sales. Our process capitalizes on the customer’s security driven responses and reluctance to eliminate more than one or two products when presented in the Package Option™ format. Many of them will drop the A&H, maybe the Life but keep everything else. Good deal. But a side benefit of this strategy is that you end up posting some pretty healthy Credit Insurance penetrations.

Another factor we have measured is that dealers who don’t offer Credit Insurance may not be replacing those products with other security driven products. A commonality among underperforming F&I departments is a reliance on finance reserve, service contracts, and maybe a little GAP as the total source of department income.

The charts below show the product vs. income numbers from a select group of dealers in one particular Dealer 20 Group study. These numbers do not include the very top or bottom performers, just the above average and below average performers in the middle.

Will today’s customer actually buy Credit Insurance?

The overwhelming evidence says they will, if you know how to present it. And the most immediate and catastrophic threats to most customer’s economic welfare are either the vehicle being totaled leaving an outstanding balance (GAP), a death of one or more of the buyers (Credit Life), or a long term disability and loss of income (Accident and Health Coverage). And they know that.

I could go on and on about why today’s customer will buy Credit Insurance, but the simple answer is that if dealers don’t present a product to a customer, they probably won’t buy it.  And that works pretty well for dealers who don’t offer enough security motivated products.

This was demonstrated in one of our surveys of new car buyers:

“Over 50% of buyers who did not purchase Credit Insurance, surveyed at 45 days after purchase, said it had not been offered. Nearly half of those said they would have purchased either life or A&H when informed of the approximate monthly cost”.

How do our dealers integrate Life and Disability into their presentation?

First, it has a lot to do with the strategy of our Package Option™ process. Now, I don’t want to oversimplify how our process works, but those of you who have attended our training know that we present all of the products in our packages and then allow the customer to control the process of modifying and building their packages. This is particularly effective when presenting “fear of loss” type products.

Our process reduces the payment by peeling off the Credit Insurance products first. The first to go is A&H followed by the Life. This approach would make it seem like we don’t want to sell Credit Insurance. However, what we are really doing is using Credit Insurance as a sacrificial lamb to give the best chance of hanging on to the other products. But our dealers also sell a lot of Credit Insurance as an added benefit.

Should you encourage dealers to present Credit Insurance?

In states where it makes sense, Credit Insurance can be a valuable addition to your dealers’ product line and a blessing to those customers who need it. Certainly, the Package Option™ method can help you do that. In many top F&I departments, Credit Insurance is still an integral part of an overall strategy that is producing those top results.

Make sure your dealers aren’t missing that opportunity. Making me refinance at the Credit Union, just to get Credit Life, doesn’t make a lot of sense.

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GAP Deductible Under Threat in California

New disclosure requirements being considered by the Federal Reserve Board (FRB) for loan insurance products aren’t the only threat to core F&I offerings like GAP coverage. In California, product providers are racing to notify dealers that one of the key selling features of GAP might be barred since a new law took effect on Jan. 1, F&I and Showroom reported.

In late September, Gov. Arnold Schwarzenegger signed AB 2782 into law. The Omnibus bill packaged, among other things, a new licensing requirement for sellers of accident and health insurance. How GAP got thrown into this new requirement is a case of unintended consequences. According to executives at the San Diego, Calif.-based OwnerGUARD, the California New Car Dealers Association asked the California Department of Insurance to clarify whether a GAP waiver would fall under the new requirement. In its response, the state agency said that the new requirement would not allow GAP waivers to cover a customer’s deductible.

Fortunately for the industry, the state’s Department of Insurance has delayed implementation of the new law, because many broker agents were unaware of the new requirement.

“The department dropped this opinion 30 days prior to the [law’s effective date], which sent dealers, providers and the agent community in a mad scramble. This is, unfortunately, something that can’t be retracted,” said Michelle Dicks, OwnerGUARD’s general counsel. “At this point, the industry, the dealers and the product providers are really concerned, as this is a crucial component of the product.”

If left unchanged, California dealers will be prohibited from selling deductible coverage through GAP if they have not obtained an agent license. In the meantime, providers are adding language to their agreements that informs consumers that deductible coverage is void.

“GAP sales can continue, but the law is what the law is,” said Dicks. “The Department of Insurance has agreed to delay enforcement through March 31, which means the department, in looking at GAP waiver forms, is not going to fine someone or haul them into court for having a form that indicates that the deductible will be covered. However, you can’t cover the deductible.”

OwnerGUARD, which has reached out to the Guaranteed Asset Protection Alliance, the American Financial Services Association, the Consumer Credit Industry Association, and several other associations, is mounting a two-pronged effort to fix the problem.

With the California New Car Dealers Association in tow, the company is working closely with the California Department of Insurance on new legislation to solve the deductible problem. “We’re really close to having language that will fix this legislation,” Dicks said.

OwnerGUARD is also working with John Norwood, a noted California lobbyist who specializes in the state’s insurance and financial sector. OwnerGUARD officials are hoping he can clear the way for the state legislature to vote and pass its drafted legislation by June, but company officials admit there are several hurdles standing in the way.

“Our goal is to, hopefully, see something in June, but nothing is ever certain,” said Dicks. “If it doesn’t work the way we’re anticipating, we might be looking at a September vote. But if our legislation is not labeled as an emergency measure, we could be looking at Jan. 1, 2012.”

This threat to GAP couldn’t have come at a worse time for dealers. The industry is preparing to mount a campaign to remove credit insurance, GAP and debt cancellation agreements from a new set of disclosure rules proposed by the FRB. Legal watchers say the disclosure rules are designed to convince customers not to buy these F&I products.

The industry is also dealing with proposed revisions to the Truth in Lending Act’s Regulation Z, which the FRB has said is supposed to enhance consumer protections for home mortgage transactions. However, the new disclosures created by the proposal would also apply to auto transactions.

Letters opposed to the proposal, which was announced in August 2010, were submitted by the National Automobile Dealers Association and others in the industry to the FRB during the public comment period, which ended in December 2010. The industry argued that the FRB overstepped its bounds and that regulation of the auto industry would fall under the Federal Trade Commission and the new Consumer Financial Protection Bureau.

“This is a huge problem for the industry,” said Al Sacko, vice-president of sales and marketing at OwnerGUARD. “We submitted our letter in opposition to what the FRB is proposing. As for California, frankly, if no one had asked the question, there would be an interpretation levied. And as you know, any of these products are typically submitted to lenders for approval, so now we get into changing forms to get them compliant. Then the department comes out and says we don’t have to have the forms in place until March. That’s when we said, wait a second, we need to look at this closer. That’s when our management team decided we needed to take some action.”

Posted in Auto Industry NewsComments (0)