A self-described “agent at heart,” Larry Dorfman has witnessed massive changes to the auto retail industry, particularly in the F&I segment, since he founded his company in 1984. Since then, they have helped secure the investments of more than seven million car buyers and paid out more than $3 billion in claims. We sat down with Dorfman to learn what changes lie ahead for dealers and how agents can help.
Does EasyCare have an agent network?
We actually have areas in the country where we operate directly and areas where we operate with agents. They do not cross over territories. If we have an agent committed to us, we’re committed to them and we make sure they have the opportunity to grow in their area. We really haven’t been out in the market looking for agents, but in today’s market, we believe there are areas we’re not in that have great agencies and that are solid opportunities for EasyCare.
We just started opening up territories for new agents and added two new agencies recently. Prior to that we weren’t looking for new agents and the last new agent we brought on was in 1999. Most of our agents have been here for more than 20 years. We’re handing out 20-year awards all the time now. The way we look at it is perhaps we could have been even bigger if we opened markets and let agents fight it out for dealers. But that doesn’t help protect the EasyCare brand.
Agents have the ability to change a dealer’s business. And it’s not just about F&I performance. It has to do with sales and service as well, and we deliver value-added opportunities in every area. We created “The Best Training Day Ever,” for example. We hold it just before NADA, wherever NADA is. It gives us an opportunity to give a day back to the dealers. Our agents go to their dealers and invite them. The trainers are partners of ours, and they use a virtual training platform for leadership, sales, accountability and service. Agents truly appreciate that training.
Have you attended Agent Summit?
We went to Agent Summit for the first time this year. I thought it was extremely interesting. Remember, I started as an agent. At one point we were doing 10,000 service contracts a month, but we were an agency, not an administrator. We became an administrator in 1991.
I’m an agent at heart. We built an administration company because we had three companies go out of business on us over a few years and we had to pay the claims. We decided we would rather build a bigger organization and have control of our dealer and customer experience, so we created the “EasyCare Experience” and began to totally control our own destiny.
There were some great speakers. I loved [AUL Corp.’s] Jimmy Atkinson. He did a great job and I sent him a note: “You’re really helping my organization, thank you!” I enjoyed meeting and catching up with peers in the industry. I think it’s a great event and we’ll be engaged again next year.
We look at this business not as a product company but as a business performance company. We help dealers and agents succeed. That’s what we do. Everything for us starts with the consumer. It’s more important that they get great value than anything else. Finance managers understand they’re offering something of quality.
The minute an agent is busy dealing with claims issues and problems, they’re not able to help their dealers out the way they’re supposed to. They’re not trained to figure out whether the wheel is supposed to be covered. We’re an organization that believes that the customer should believe that what they buy does what it says it does. When this happens, life is easier for everyone.
It’s clear that regulatory compliance will continue to be a major point of concern for dealers in the years ahead. What role should agents and product providers take in ensuring their dealers are maintaining a compliant F&I process?
With compliance, it is a situation where there’s no silver bullet. You can get AFIP-certified and pick up Mosaic’s compliance processes and everything else, but we’re still human beings.
The horizon is changing. You can’t look through the crystal ball. Am I concerned about aftermarket from the compliance perspective? The best thing you can do is make sure you’re compliant currently. We help our agents with a pretty comprehensive compliance training on our EasyCare Virtual Training platform that our dealers can use to assure that every employee is trained on compliance, has signed off that they were trained and the evidence they were trained is digitally memorialized. We provide this at no charge for our agents and dealers, along with a lot of other video training on the site.
A bigger issue is the compliance of the products themselves. You’ve still got administrators offering products as warranties that shouldn’t be. The administrator, the dealer and the agent are at fault. And the biggest hit is to the dealers. Some providers will literally disregard certain state statutes. They think if the state doesn’t address it specifically, you can write it any way you want to.
I can assure you that if you spray some stuff on the wheels and say it will protect them from curb damage for a year — when the material sprayed on the wheels isn’t made to prevent cosmetic damage — you are just asking for a problem when it’s finally reviewed by an insurance department.
What is a warranty and what is considered insurance? Those kinds of compliance issues are where agents can be more careful in selecting their providers and making sure the product is fully compliant before they offer it to the dealer.
And those standards vary from state to state, correct?
Yes. In one state something may be considered to be able to be offered as a warranty and in another it is required to be a VSC, or vice versa. We have eight people in our legal and compliance department who spend all day studying state and federal regulations and insurance laws. Anything we write is going to be considered compliant by the state it’s sold in at that time, and if it changes, we know it and make the changes accordingly. We’re overly cautious and conservative in the way we approach the marketplace. Some folks will say, “Let’s write a warranty on that.” And that’s all the research they did.
We operate in both the independent and the franchise dealer world. We are way more than an F&I and service contract provider these days. Our objective is to literally transform the dealership experience. We spent the last 13 years focusing on changing the experience for the customer and now will be focused on tying that to enhancing the actual dealer’s ownership experience.
One solution offered by dealers at the most recent Compliance Summit was to set fixed prices for every F&I product.
We have been proponents of one-price selling in F&I for years. We can’t force a dealer to do one price on F&I products, but here’s a simple question: Why would one customer buying a Ford F-150 buy a five-year, 30,000-mile service contract for $500 less than the next customer buying the exact same vehicle? The answer is because the second customer was willing to pay the higher price, so the finance manager went ahead and got it.
That’s the problem. That’s why we (the auto business) have the reputation we have. You will actually make more money by setting your prices and setting your margins. Menu out the contract you feel meets the driver’s needs and give them a price. If the customer needs a lower price, raise the deductible, shorten the term or shorten the coverage, or move from total coverage to stated coverage.
You can even use an electronic system that locks in the pricing and teaches people to adjust price based on adjusted value. Around 42% of our dealers are doing that now, and we’re getting a lot more going in that direction. And we’ve been working with Sonic for four years to build their One Sonic-One Experience initiative, which includes one-price F&I. They’re doing it right.
We have a long way to go. The reason Agent Summit is even there and the reason there are administrative lobbying groups is to govern ourselves. We’re part of the problem if we’re helping dealers charge all kinds of prices. Look, your goal is to give the customer a great value and the best experience you can. It can be done in a transparent way. A perfect example is selling the service contract to term of loan. That’s what F&I was taught for a long time. Why sell a 72-month contract when the customer is going to own the car for four and a half years?
I think it’s up to us to offer a compliant product and compliant pricing guidelines and train accordingly. At the end of the day, the question is, should dealers be pricing their benefits at a one-price level and holding the line on those? If they want to be able to discount, discount them all by $200. You gave everybody a consistent deal.
Last question: How do you like to spend your time off?
Well, I have a large family. I have five kids and three grandkids. Cathy, my wife who started EasyCare with me, is one of 10 kids, so there’s a lot of extended family as well. When I have time off I like to spend it with her and the kids, or our close circle of friends.
What I really love to do is listen to live music. I try to see a show every couple of weeks. We just saw Shawn Mullins, Edwin McCain and Marc Cohn. We are going to see Van Morrison in a couple of months. I like small venues where the artists get intimate with the crowd.
I actually owned a recording studio in Atlanta for 15 years. I don’t play, but I love music.