The first 16 months of Dominic Sansone’s career at Warrantech were marked by uncertainty. The last eight months, however, have been filled with anything but for the president of the Bedford, Texas-based company’s automotive division.
Last September, a majority interest of Warrantech, which was founded in 1983, was acquired by New York-based AmTrust Financial Services, a multinational property and casualty insurer that acts as its own administrator, claims its own insurance company and is publicly traded on the NASDAQ. Sansone, whose 35 years in the industry includes a 17-year stint as a dealer, talked about what the acquisition means to his business unit and its competitors.
F&I: Can you talk about the difference between your new owner and the private equity firm that purchased you in 2007?
Sansone: Well, H.I.G. Capital specializes in buying companies, so their interest in us was different than AmTrust’s. AmTrust has been in this business and views Warrantech as a way to expand its footprint, so it’s a perfect marriage. It’s also one of the few companies where the insurer and administrator are vertically integrated, and that security is priceless.
F&I: Sounds like you’ll be going after the Warranty Groups and CNAs of the world.
Sansone: That’s the strategy. And in a lot of areas, I think we’ve surpassed them. We have products no one has, and we’re doing some things that will really put us ahead. We created a new division that focuses solely on providing training and income development to our dealers and agents. It’s headed up by Michael Burgholzer. So far, he’s revised and enhanced several areas of our business. He’s also big on technology, and AmTrust is committed to supporting his plans.
F&I: What new technology are you bringing to market?
Sansone: Right now we have a Web-based training and reporting tool. We’re also looking at an iPad tool that will allow sales managers to track where their salespeople are in the process. It’ll also track performance. All of this is part of the services and tools our dealer customers will have access to when they sign up with us. And what we’ll do is go in and perform a complete analysis of their dealership and develop a plan for income development.
F&I: Did having your own insurance company help Warrantech become Volvo’s factory-authorized, OEM service contract administrator?
Sansone: We just finished our first month of business with Volvo and we’re very excited about that relationship. We’re talking to other OEMs, so this is a space we’re looking to grow in. The fact that we have our own insurance company has really given us credibility in those conversations.
F&I: Can you talk about your month-to-month service-contract offering? I’ve received some questions about that product recently.
Sansone: There are products out there that claim to be month-to-month programs, but they’re really just 5-year, 100,000-mile programs, divided up. What we offer is a true month-to-month product that automatically renews on a monthly basis until not renewed or the customer stops making payments. We have two levels of coverage: Vehicles with less than 65,000 miles get exclusionary coverage, which expires when a vehicle is either five years from inception or reaches 100,000 miles. We also have enhanced powertrain coverage, which covers main components for up to 125,000 miles from the time of purchase and for as long as the customer continues to pay.
F&I: I’ve heard these programs can be problematic.
Sansone: Well, I originally designed this program for the direct marketing channel, but it ended up being popular with affinity groups like Publishers Clearing House. Dealers can use it to reconnect with past customers who didn’t purchase a service contract and whose warranty is set to expire. It can also be offered as a separate plan when there isn’t any room in the loan for a standard service contract.
As for being problematic, are you referring to cancellations?
F&I: That’s right.
Sansone: The only time there could be a cancellation on this product is when we charge our initial activation fee, which includes the first month’s payment. Now, coverage actually starts 30 days from when the customer pays, so if I purchased a plan today, April 11, my coverage would start on May 11. But as long as you keep paying, you have coverage.
F&I: Can you talk about your other offerings?
Sansone: Over the last two years, we brought in our top agents to tell us what we needed and what we were missing. One of the products we updated based on their feedback was our CustomEdge plan, which is unique because the customer chooses his or her own coverage terms and then we price it to the year of the car, the time the customer is buying it and the mileage. We also made changes to our MileEdge product, which is geared toward the used-car market. We also have specialty programs like our SecureEdge, which is a wrap product for certified vehicles. And for price-sensitive customers, we offer OwnerEdge, a limited coverage, 5-year, 100,000-mile plan. We also added a product for the service drive.
One other thing, we’re now underwriting our own GAP product. We used to outsource it, but AmTrust is committed to underwriting all of our ancillary products.
F&I: What about reinsurance?
Sansone: Ninety-five percent of our dealers and agents have reinsurance captives, so most of our business is reinsurance. Bernie White, our vice president of reinsurance, heads up a team focused solely on that part of our business. And since the acquisition, we’ve modified our program so our funding time is now within 30 days. We also have better investment options for captive owners.
F&I: You also mentioned you added a service drive product.
Sansone: It’s called Extended Labor Protection. We view it as a customer-retention tool that works on non-warranty repair work. So, let’s say you have a customer who needs a new alternator. Well, the part typically comes with a 12-month warranty and dealers will provide a 90-day or 12-month labor warranty on top of that. So, we’ve created two plans that allow dealers to extend that 90-day coverage to 12 months, or that 12-month warranty to two years for both the part and labor. And those products can be printed right on the repair order. Right now the product only works with a dealership management system from ADP or Reynolds, but we’re looking to expand that.
F&I: So, what’s your outlook for this year?
Sansone: Our outlook for our company is very positive. So, if you haven’t heard of us — which is impossible, given that we’ve been around so long — you’re definitely going to hear from us a lot now.