Administrators are often urged to provide products to agents and dealers that are “cheap in price and low in value.” Agents and dealers flock to the “easy and cheap” products. Unfortunately, most of the administrators that entered the industry with an easy, simple and cheap product are the same administrators that are no longer in business…the short-term, fast-lived companies: API and Ultimate are a couple examples.

The quality administrators will begin to take a stand and live for the long run, not the quick and easy business with little substance. Administrators that write contracts that don’t meet customers’ expectations or that are filled with loopholes to avoid payment have given our industry a black eye.

Products that are written with the intent not to pay a claim tend to be cheaper products and will only cause each and every administrator trouble in the future. These products drive poor CSI, upset dealers and ultimately cost everyone more money.

A product should be written in the same way that the F&I manager is going to sell it. The long-term CSI and the protection of the customer and dealer should be the most important components of the product.  Let’s take a look at a few examples that are potentially harmful to a customer and a dealer, ultimately leading to the agent and the administrator receiving the “black eye”:

Service Contract Refund Programs – Time Only

How the F&I manager sells it:“The best part Mr. Customer is that if you never use your service contract, we will give you 100 percent of your money back.”

What the customer heard:“If I don’t use it, as soon as it expires, I get my money back.”

The reality: With Time Only refund programs, customers have to wait until the contract expires by TIME. So, if they were sold a 7-year/100,000 mile program (most popular) and customers drive 100,000 miles in five years, they have two choices: (1) keep their car another two years and not trade it (not good for future car sales) waiting for the contract to expire by TIME or (2) take the hit and not get a refund.

With the second choice, the customer is mad and the dealer has to either eat crow and refund the customer or lose the sale. Both options are horrible for the dealer and the customer.

Tire and Wheel Road Hazard Programs – Without Curb Damage

How the F&I manager sells it:“The best part Mr. Customer is that if you ever have a flat tire or damage to your rim for whatever reason, this program will repair or replace your tires and/or rims at no charge.”

What the customer heard:“Everything is covered, even if I hit a curb.”

The reality: Tire and wheel coverage that does not cover curb damage ends in disaster for everyone involved. More agents have expressed their frustration with this product because they end up paying these claims out of their pocket or their dealers have to pay out of theirs. Why not just sell your dealers on why they should have a slightly higher priced product that does what the customer perceives it to do? It should pay for damage, no ifs, ands or buts!

Windshield Programs – Repair Only

How the F&I manager sells it:“The best part Mr. Customer is that if you are driving down the road and a rock hits your windshield, it will be fixed.”

What the customer heard: “No matter how big the crack or hole is, my windshield is fixed.”

The reality: The contract only pays for repairs (usually up to a 6-inch crack). The reality is that very few damaged windshields can be repaired and most need to be replaced. So here we are again with a contract written that doesn’t perform according to the expectations of the customer.

Most dealers and agents become trapped into finding the least expensive 4-and-1 or 5-and-1 “combination” product. Watch out because these are the very contracts that are written one way and presented to the customer a completely different way. Sure, they are easy to sell, but who are they benefiting other than the administrator? Certainly not the customer or the dealer in the long run.

Unfortunately, many products developed with only cost in mind are too early in their shelf life for dealers to have learned their lesson. As administrators, we all need to band together and create contracts that perform according to the perception of the customer and the dealer. Remember the old adage “if it is too good to be true, then it is.” When a dealer or an agent is shopping for the “best deal,” it isn’t always all about cost.