It’s the largest single-source provider of underwriting and administration of service contracts and extended warranties, touting a global footprint that extends into a variety of consumer goods, from autos and electronics to major home appliances and travel. But as complex as The Warranty Group has become, it remains true to its principles, says Michael Frosch, the company’s president and COO of North American operations. Frosch opened up to the magazine and offered his vision of the road ahead for the automotive industry.
F&I: The Warranty Group and its Resource Automotive entity have been through a lot of changes. Can you get our readers caught up with where your company stands today?
Frosch: The big picture is The Warranty Group, whether it’s in China, Latin America or North America, or whether we’re talking protection products for electronics, appliances, travel coverage or automotive. Resource Automotive simply represents the auto side of our business.
F&I: What was the strategy during the downturn?
Frosch: The strategy was to work with the best of the best. It was about helping dealers through automation, enhancing our solutions and providing support to maximize the benefit.
F&I: Your insurance carrier, Virginia Surety, definitely won some battles in the trenches this year, picking up clients such as Safe-Guard and Interstate. What was behind that division’s success this year?
Frosch: There have been a lot of companies that have come in and out of our business. A lot of them thought they could do it, but, in the end, they couldn’t. Unfortunately, the only ones who got hurt are the dealers and their customers. So, what you saw in 2008 and 2009 was really a flight to quality, which obviously benefited us since the clients we picked up were looking for a partner with the focus and experience in this very specific business.
F&I: Talk about the company's ResourceVIP program, which you rolled out in 2004. If I’m not mistaken, it represents your first foray into inventory management.
Frosch: Well, our mission is to maximize income for our clients on a per-vehicle basis, and ResourceVIP supports that concept. It’s a custom program that helps dealers manage their returns on their inventory and allows them to see what’s moving, when it’s moving and what the requirements were for their inventory to move.
F&I: Where do you stand on all this talk about dealers combining sales and F&I roles?
Frosch: We continue to see great value in the F&I model. It has worked and it has been successful. However, we recognize that there is no
one-size-fits-all [solution], so we support our clients as they wish to be supported.
F&I: I’ve noticed a real pickup in interest for reinsurance. What are you seeing?
Frosch: Reinsurance remains a successful model in this industry, and it’s an extremely valuable tool if you partner with a company that understands it, has experience with it, knows how to handle claims, takes care of customers, knows how to price and configure the product and will act as a partner to you. And that’s what we bring to the market.
See, we’re not a monoline, one-approach kind of company. We have direct programs, reinsurance programs, dealer-obligor programs. We are the underwriter, the actuary and the administrative company, and we own our own compliance groups and entities. So, it really is about what our clients want to accomplish. I always like to phrase it as, ‘What you need, when you need it.’[PAGEBREAK]
F&I: Talk about your prepaid maintenance product and the things you’ve done to increase customer loyalty.
Frosch: It definitely is a great product for pumping the service drive. However, we view our entire product portfolio as valuable components of a customer-retention strategy. What makes us different is the customer touchpoints we’ve built into these products — e-mail reminders, things of that nature.
So, prepaid maintenance is a viable product, as is our QCertified product, as is our LUXCARE environmental protection product, as is GAP. We just believe it’s the technology we employ that really adds value for the consumer.
F&I: Do you consider mobile devices a viable touchpoint?
Frosch: We’re looking at every potential touchpoint with a consumer as you would expect, and each customer really has a different way that they wish to interact. So, we’ll continue, as others in the industry will, to look at new options and opportunities.
F&I: Fuel efficiency remains a big topic in the industry. How has that impacted your offerings?
Frosch: When you see the Volt or the Leaf come out, it’s clear products must continue to evolve. It’s the same thing when you see manufacturers offering longer warranties or longer powertrain coverage. Now, the advantage we have is that when new technology is introduced, we’re going to see it pretty quickly because of our global exposure. Remember, electric cars are not a new concept and neither are hybrids. What we are able to do is leverage the information we collect, pull it together and make decisions on how to create, customize and adapt.
F&I: Speaking of longer warranties, were the fears expressed a couple of years ago regarding the factories extending out warranties
Frosch: That definitely didn’t have an impact, because, again, we found mechanisms to expand our coverage to complement whatever the expanded warranty was. Expanding powertrain coverage is great, but that’s not expanding the coverage on the vehicle. There are still a lot of items out there where the customer needs protection. Still, when these changes come down the pike, it’s about how well you understand the business and about how quickly you can market and develop new products to complement the changes.
F&I: Given the intense fallout from the US Fidelis debacle, where do you stand on the direct-to-consumer
Frosch: We have multiple points of distribution. At the end of the day, it really is about how the customer wants to be interacted with and making those options available to dealers. As for US Fidelis, we don’t view that as a distraction to that model.
F&I: With the economy growing again and added stability on the lending side, will we realize the industry’s “new norm” in 2011?
Frosch: There are micro- and macroeconomic issues that are driving everything, so right now the new norm is holding your vehicle longer. The new norm also is change, which is why it’s critical that you partner with someone who is flexible and can adapt. As for my outlook, there’s no denying that the last couple of years have been interesting, and that the next two will be the same. The good news is, we’re looking at a big block of consumers who will be coming into their prime spending period.
For right now, I just think we’re in a transition period.