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Keeping Dealers and End-Customers Covered

Interstate National Dealer Services offers a niche product for units from bankrupt RV manufacturers. It also has other programs to make F&I more profitable for dealers.

Earlier this year, Jacob Richardson was approached by an RV dealer who was concerned he would be stuck with dozens of travel trailers and fifth wheels when the manufacturer that made them suddenly ceased operations. Richardson, the national sales manager for Interstate National Dealer Services, immediately saw an opportunity to fill a need.

“I had a dealer sitting with about 30 units on his lot. He needed help,” Richardson says. “When RV dealers have a need we step up to the plate and fill those needs; that’s what we did for this dealer and other dealers.”

In response to dealers’ requests, Interstate developed a policy called the Interstate Star Structure Limited Warranty, which provides a one-year limited warranty specifically for units from RV manufacturers that are no longer in business. The warranty – which covers the unit’s structure – essentially mirrors the coverage that most RV manufacturers offer on their new units. Interstate offers the coverage to any dealer who agrees to sell at least five of the company’s regular StarRV service contracts per month.

Considering the record number of RV manufacturers that have shuttered their doors in 2008 – including Alfa Leisure, Ameri-Camp, National RV, Pilgrim International, Sunshine Coach Co., Teton Homes, Western RV and Weekend Warrior – the new coverage would seem to be timely.

“With the manufacturers we lost this year the RV industry took a pretty good hit. It left a lot of dealers with a lot of inventory,” Richardson explains. “So, by providing them (dealers) with a warranty to cover the structure it helps them sell that unit.

“It’s just a niche product I added to my existing StarRV program,” he adds. “We like to be known as the niche administrator because, you ask me, and I can probably do it for you.”

Dealers appreciate the coverage because it gives their customers added peace of mind in buying a unit from a manufacturer that is no longer in business, according to Richardson. “I have dealers writing it (the warranties) now. They’re happy … because they’re able to move those Pilgrims and those Weekend Warriors because they have a structural warranty that goes with those units,” he says. “So it’s been successful.”

The limited structural warranty program is paid for by dealers, but Richardson says the cost is modest and is usually rolled into in the cost of the unit. “In many cases, dealers are up-selling (customers) from that, because they sell the buyer a service contact. It’s a win-win situation for them. They made a profit on the service contract and they in-boarded the cost of the structural warranty, which is not that much. And they made a profit on the unit.”

One business that was preparing in late 2008 to offer Interstate’s limited structural warranty on RVs where the manufacturer has ceased operations is General RV, a large, multi-location dealership with stores in Michigan and Ohio. Offering the coverage makes good business sense, says Spencer Hallett, a senior business manager with General RV.

Jim “Dandy” Cooley, owner of the Dandy RV mega-dealership in Aniston, Ala., hasn’t had the need to use that particular warranty program, but he calls it a godsend to dealers who have been stuck with units from RV manufacturers that are no longer in business.

“I don’t have any (orphaned units) like that personally, but if I did it would really make me feel good,” says Cooley, who is known in the industry as Jim Dandy. “I am a dealer that got stuck with a manufacturer in 1992 that went bankrupt and it cost me almost $200,000 in warranty work, and of course we couldn’t get this program back then, so this is a great thing.”

Interstate Has Dealers Covered

Richardson says that Interstate National Dealer Services is one of the oldest and largest administrator companies. The company – which serves the automotive, marine, powersports, manufactured housing and RV industries – was founded in 1980. The company’s StarRV administrative business has been in existence since 1995.

StarRV offers customers three levels of coverage: Platinum, Platinum Plus and Diamond. Platinum is the most basic, covering major components such as the chassis (engine, transmission, brakes, electrical, etc.) and coach (water heater, waste system, fresh water system, L.P. gas/propane system, etc.). Platinum Plus covers everything Platinum does plus high-tech components, hydraulic/leveling system, seals and gaskets, etc. Diamond is the comprehensive policy, covering everything on the vehicle short of “exclusions” in the contract.

StarRV coverage is good anywhere in the U.S. as well as Canada.

Richardson says Interstate has a set dealer cost for issuing a warranty. However, the company doesn’t cap the fee that dealerships can charge customers for offering coverage. So, for example, if the dealer fee is $500, the dealer can then turn around and mark up the cost of that coverage by 50 percent, or 100 percent, or even 200 percent, according to Richardson.

Interstate has sold and administered more than 2 million service contacts and paid out more than $500 million in claims during its 28-year history, according to company literature. The company says that an average of 7,000 claims are handled each month and that most claims are authorized in 10 minutes or less.

Richardson says that when Interstate pays a claim, it does so by credit card, electronic transfer or by check delivered within 24 to 48 hours in order to facilitate quick payment. “It makes life easier for the service department,” he explains. “There’s no open RO (repair order) at the end of the month. It (payment) happens the same day. Accounting departments love that.”

Richardson adds that payments are made to the repair facility, not the customer, which ensures that the dealership or shop is compensated for its services.

Some service companies market warranties but leave the administration of those warranties to a third-party administrator. That’s not the case with Interstate. Richardson says handling both sales and administration in-house is to the benefit of customers.

“When you’re calling StarRV, you are actually calling the administrator. Everything is under one roof,” he says. “So if one of my dealers calls and says ‘Jacob, I have a claims issue,’ I can walk from my desk to my claims department and get an answer (quickly).”

Interstate has about 40 claims advisors, all of whom are cross-trained to handle all types of claims. In total, the company employs about 130 people out of its headquarter offices in Uniondale, N.Y. It also has independent agents in the field. Richardson says all of Interstate’s StarRV agents are RV-exclusive, which he says benefits RV dealers.

“We don’t sell anything but RV, my agents that handle RV,” he says. “That’s what we specialize in, so those guys know RVs inside and out. So, when I send an agent into the dealer, they are very professional and very well trained. Which is good, because they can focus on the needs of the RV dealers.”

And to help dealers better understand the finance and insurance process, particularly when it comes to selling Interstate products, the company has its own in-house F&I trainer, Bill Gillman, who holds free, intensive training sessions at the company’s headquarters and also in the field.

SAM, MOP & PPP

Richardson says Interstate offers a number of services to its dealer partners. One is SAM, or Sales Administration Module, which is a menu-selling platform that is free to any dealer that sells Interstate programs. SAM allows dealers to go paperless, creating quotes, contracts and claims submissions online. Notably, SAM integrates with ADP Lightspeed and Reynolds & Reynolds dealer management software to populate customer and vehicle information, thereby avoiding the need to retype information.

“SAM makes it easier for dealers to sell services to the customer. It tells customers what the coverages are. Customers must sign a declaration saying ‘yes, they want the contract’ or ‘no, they don’t.’ It protects the dealer if the customer comes back and says they weren’t offered coverage.”

Recently, Interstate launched a new program called MOP, or Missed Opportunity Program. With that program, dealers using Interstate programs provide the company with the names and contact information for customers who didn’t buy service contracts when they purchased their RV, and when customers’ manufacturer warranties are set to expire Interstate contacts those customers on behalf of the dealership seeking to sell them an extended service contract. If a customer buys a contract, the dealer gets a percentage of the profit.

“It’s another touch to the customer, for the customer that did not buy at the time (they purchased their RV),” Richardson says. “And the dealer can still make a profit; because we sold a customer a service contract we provide the dealer with a profit. That’s just an added benefit we give to our dealers.”

Through Interstate’s Producer Profits Program (PPP), the company offers dealers three ways to earn income: at the time a policy is sold, on interest in reserve accounts (which are paid out to dealers every six months), and on underwriting profits not used to pay claims. Richardson notes that Interstate releases 50 percent of underwriting profits to dealers halfway through the policy. So, for example, if a dealer sells a five-year policy, at 2.5 years the dealer would receive 50 percent of those profits, assuming no claims were paid on the policy.

Dealers must sell at least five service contracts a month in order to participate in PPP. Richardson says he’s given checks to dealers for anywhere from $100 to $500,000 in underwriting profits.

“In today’s times, delivering checks to dealers makes you look good. It makes you look real good,” Richardson says with a laugh. “So it works out really well.”