In late August at Paris Las Vegas, Aaron E. Lunt delivered “F&I Products, Regulators and the Presidential Election,” a dynamic opening keynote address that served as a crash course in the design, sale and regulation of F&I and other insurance products. As an attorney and executive, Lunt helps make the big decisions at The Warranty Group, where he serves as assistant general counsel and head of regulatory affairs. P&A caught up with Lunt to talk about his love for the law, the rigors of college athletics, and the past, present and future of compliance.
P&A: Aaron, what made you want to become a lawyer?
Lunt: I was a business administration major at Trinity Christian College, which I attended on a partial basketball scholarship. I considered making political science my major, but it just didn’t make sense. A professor encouraged me to take the LSAT, and I did reasonably well. I was able to get into the John Marshall Law School here in Chicago.
But I should tell you my interest in the law was originally piqued by my high school soccer coach, Bob Thomas. He was a placekicker for the Chicago Bears in the 1970s and ’80s. He became an attorney and later an appellate court judge, and he currently sits on the Illinois Supreme Court. He mentored me and was highly influential in my decision to pursue the law as my career.
P&A: What was law school like?
Lunt: Intense. Law school is designed to beat you up a little bit. In the first year, they scare you to death. Then they work you to death in the second year and bore you to death in the third. There is an unbelievable amount of reading.
The goal is to develop your analytical and reasoning skills. They use the Socratic method. The professor calls on a student and you literally could be on for the next 45 or 50 minutes, answering questions and lobbing counterarguments. Then you take an exam at the end of each semester, and that’s your entire grade. It was intense, and the competition was fierce.
P&A: Did you excel?
Lunt: I did. I made the law review, which is the preeminent journal each law school has, and it’s typically only open to students who rank in the top tier. I would say I quickly emerged as a thought leader.
P&A: How did you end up practicing law in the automotive industry?
Lunt: My first job out of law school was with an insurance defense law firm. I then migrated in-house at Zurich Insurance, where I learned all about corporate law and compliance, and then to The Warranty Group. So you could say I fell into it. It’s really a combination of your first job and where your passions lie that dictate the type of law you practice.
When you’re an in-house lawyer, you need to be part of your company’s strategic planning. When you’re with an outside law firm, more often than not, you react to problems as they manifest. You have no financial connection other than your fee. When you’re working in-house, your client is your employer, and you need to be prescient. You’re navigating the headwinds of the market, the regulatory environment and the broader economy. You need to help the company move forward.
P&A: An attorney friend of mine once told me a good lawyer will tell you what you can do, whereas a bad lawyer only knows what you can’t do.
Lunt: I agree with that statement. A lot of legal departments get labeled as the “deal prevention unit.” You can come in with a great idea or a great new client relationship, and the lawyer says there are too many problems. I spend a lot of my time on strategic development initiatives. I understand our direction, the type of clients we want to win and the types of products we want to sell to consumers. Being engaged on the front end enables me and my team to think of compliant solutions early, so business goals and objectives can be attained.
P&A: Are friends and family always asking you for free legal advice?
Lunt: It happens from time to time. They often ask about family or estate planning issues, which I know little about, as it’s not my area of expertise.
P&A: Do you resent that? Wouldn’t you rather they asked about your other interests?
Lunt: No, I don’t. I do wish I could be more helpful at times. Someone might need technical guidance on a particular area of law, which I know little about, but I oftentimes can be helpful in assisting them in breaking down the issue or pointing them to a resource. So I don’t resent it. I can put my analytical and problem-solving skills to use and help coach them in the right direction.
P&A:Do you often get to work with agents and dealers?
Lunt: Not as much as I would prefer. Our frontline sales team primarly handles those relationships. The entrepreneurial spirit is alive and well in our industry, and I love that. We are an industry of problem-solvers and we work in an industry that is important to the national and global economy. People are looking for financial peace of mind when they buy a protection product. Our organization is excited when we are able to assist a consumer in their time of need to fix their automobile, which is the mode of transportation to get them to work, to see family, to the grocery store, to community outings, or just about anywhere they need to be. We want to do the right thing as an industry.
P&A:You have spoken at three Compliance Summits. Are you encouraged by what you’re hearing there?
Lunt: I am. I think it’s a great event that brings together agents, dealer principals, providers, attorneys, compliance professionals — it’s just a great cross-section of industry stakeholders. We can get too focused on the day-to-day and miss the bigger picture. What are the really big issues? You learn new things from each other and new business happens.
P&A: Do you believe the Consumer Financial Protection Bureau will attempt to regulate the pricing and sale of F&I products?
Lunt: The CFPB has said they’re looking at the add-on products market. I don’t know exactly what that means or where they’re looking to go; only time will tell. To this point, the CFPB has focused primarily on lenders and how add-on products are marketed. I think the industry, however, has an incredible opportunity to explain our value proposition to the CFPB and consumer organizations. We have to counter some of the negative perceptions with education.
P&A: Will that require a structural change? Do we have to bring F&I out of the back office?
Lunt: Not necessarily. I don’t think we need a structural change. With the advent of the Internet and increasing sources of information, we have a more educated consumer. The degree of knowledge is only going to grow, for a variety of reasons. The F&I office is the traditional way to distribute product, but there are direct-to-consumer companies competing for those customers. So they have a lot more choice than they’ve had and certainly more access to information.
P&A: Do you think there’s enough good information about F&I products out there to counter the high-profile consumer advocates who are telling car buyers they don’t need them?
Lunt: No. I think there is an opportunity to provide information on the importance of extended warranties and service contracts, as well as help educate consumers on selecting the best provider for their needs.
P&A: Are you from Chicago?
Lunt: I am, born and raised in the northwest suburbs.
P&A: Tell me something about Chicago that most people don’t know.
Lunt: Most people don’t know that Chicago is literally a little insurance capital in North America. You’ve got several insurance companies headquartered in Chicago or in the Chicagoland area. The Warranty Group was founded in Chicago in 1964. But other major players have a significant presence, including Zurich, CNA and Allstate. You’ve also got several brokers with headquarters or a substantial presence in the area. Chicago has a lot of industry; it’s almost like the Wall Street of insurance.
P&A:It’s funny you say that, because I’m calling from Hartford, which bills itself as the insurance capital of the world.
Lunt: Hartford certainly has a big piece of the insurance industry. I’m not trying to dethrone Hartford. But Chicago has so much industry, and it’s in the center of the United States. So in my opinion, it has a geographical advantage over Hartford. Our city has a lot of things going for it.
P&A: What do you do in your spare time?
Lunt: I’m married and we have three children, all boys. We are involved in a lot of sports, including soccer and basketball. We like to swim as a family. And we are very active in our local church.
P&A: You played basketball at the college level. Do you still play competitively?
Lunt: No, I do not, other than with my kids. It’s hard to find time, and I would be worried about injuries. It would be difficult to commute if I blew out my knee or twisted my ankle. Not to mention the fact my skills have greatly diminished since my playing days!
P&A: Don’t you miss it?
Lunt: I miss the competition, intensity and discipline of being a collegiate athlete. But I channel that energy into other areas. The lessons I’ve learned from playing competitive sports have translated well into my professional career.