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Combating Insurance Companies

This month’s submission comes from Performance Chrysler Jeep Dodge Ram in Bellevue, Neb. The business manager there had a customer who was sold on a vehicle service contract (VSC), only, the customer wanted the program his insurance company was offering.

I’m guessing insurance companies became a threat to the F&I office the moment someone suggested that dealerships, in order to reduce liability, contact the customer’s insurance company to get his or her vehicle on a policy. It was a good thought, but it’s kind of backfired on us.

The problem today is insurance companies are beginning to offer products that resemble the ones on our F&I menus. So what do we do? Let’s break this down.

Name: Rashon Collins Sr.

Company: Performance Chrysler Jeep Dodge Ram

The Challenge: “Farmers Insurance sold my all-ready sold customer its service contract. The coverage is allegedly the same, but the VSC is $800 cheaper. What can I do besides discounting to match Farmers’ price?”

Tony’s Take: First, you need to familiarize yourself with the insurance company’s product offering. You also need to freshen up on your own product, because you’re going to have to get on the phone with the customer’s insurance company to poke holes in its product offering. And you’re going to do that in front of the customer.

The Angle: Let’s focus on the service contract. The insurance company will either offer a VSC or mechanical breakdown insurance (MBI). You need to know which one, because there are distinct differences.

MBI is typically sold through national discount insurance companies as an additional rider or addendum to the customer’s insurance policy. The primary difference between MBI and your offering is the stated coverage.

See, an exclusionary VSC will list which components are not covered, while a component VSC will list what is covered. The MBI does neither. So customers will only know what’s covered when they have a claim.

The Interrogation: Here are some questions you can pose to the rep if faced with MBI coverage: Are only factory OEM parts used? Is this a reimbursement contract or is the service facility paid directly? How much will it pay for labor? How does the insurance company determine the hours paid to the facility for a repair? Will it pay for other items such as sales tax, shop supplies, diagnostics and a loaner vehicle? What happens if the customer has an issue while on the road?

Those questions assume your coverage pays for only factory OEM parts and pays the repair facility directly and at its posted labor rates. They also assume your VSC covers other ancillary charges related to the repairs. And don’t forget that there’s a chance the insurance company will rerate its MBI coverage based on usage.

Now, the biggest difference between your offering and MBI coverage is the deductible. The insurance company’s deductible can cost up to $250 per repair, not per visit like the VSC you offer. So if a customer has three authorized repairs, the customer only has to pay for the visit with our program. With MBI, you pay per repair.

If the insurance company is offering a service contract similar to yours, you’ll need to make some pricing adjustments. Understand that many insurance companies are putting their names on service contracts administered by a subsidiary. So do some research.

The Approach: If faced with MBI coverage, utilize your product knowledge to illustrate the advantages of your VSC. Here’s how you do it:

“Mr. and Mrs. Customer,  it’s great that you see the benefit of having the service contract on your vehicle; however, by enrolling in our program, you will have the peace of mind of knowing exactly what’s covered and what’s not. You can also be sure the provider we selected will deliver maximum customer satisfaction. And by that I mean you can be sure the right parts will be used and that the provider will pay the correct labor amount to minimize your out-of-pocket expense. So wouldn’t it make sense to enroll with the service contract program here at the dealership?

Tony Dupaquier serves as director of training for American Financial and Automotive Services Inc.’s F&I University. If you’d like his help on a troublesome objection, email him at


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