With car retailers facing an ever-increasing regime of compliance and regulation requirements, leading warranty provider WMS Group is urging the sector to meet the demands head-on by adopting a ‘customer-first’ approach – particularly when it comes to the sale of insurance products.
Earlier in the year the Financial Conduct Authority (FCA) banned the use of discretionary commission models in the motor finance market. The move is set to pave the way for greater transparency in how the sector sells a range of products to consumers, including the likes of mechanical breakdown insurance, GAP insurance, tyre and alloy wheel insurance and SMART repair.
To ensure dealers are able to meet forthcoming requirements head on, WMS Group is working to develop a range of ‘insured’ warranty solutions, which bring significant benefit and protection to both dealers and customers alike.
Andy Shipp, Head of Governance and Compliance at WMS Group, said: “The used car market is experiencing a buoyant return as the nation continues to emerge from lockdown. Sales are up, and demand for warranty products is too – so there is a need for dealers to ensure they provide the flexible solutions that customers require with an aging vehicle; be that via insured or uninsured products.”
According to the Society of Motor Manufacturers and Traders (SMMT), the used car market experienced its strongest ever second quarter in 2021, with the market growing by more than 108%. The increase in sales reflects the country’s gradual emergence from lockdown, with demand for personal mobility increasing as businesses reopened and a continued stock shortage of new vehicles forcing some customers to turn to used models.
Andy said: “The industry already faces tough regulations and compliance requirements, so all too often we find a reluctance from dealers to invest in longer-term insured warranty products that require greater regulatory investment. However, with customers investing in older vehicles, many of which are outside the standard manufacturer warranty, there is a need for a robust warranty solution that often only comes with an insured product.
“Whilst uninsured warranty products absolutely have a role to play in meeting customer demands, they are only able to reflect a dealer’s obligations under the Consumer Rights Act 2015 and the reasonable expectations of the customer. Insured products, however, allow for greater levels of cover and service enhancements – which naturally provide a greater level of reassurance and appeal to those investing in slightly older vehicles.
“Whilst many dealers have FCA permission for credit broking, they require additional permissions to sell insurance products. With many of them continuing to adjust to recent FCA changes and a moving post-lockdown sales arena, an additional FCA approval and a need to meet further compliance requirements can feel like a burden – particularly when you consider The Senior Managers and Certification Regime and the personal accountability that comes with it. In this instance, my advice would be to work alongside an ‘FCA principal’, who can effectively authorise retailers as an Authorised Representative to sell insurance products – supporting them in meeting compliance standards and the associated risk.”
According to Andy, dealers that have a range of warranty solutions and associated products for customers to choose from are set to be in a far greater position than those that limit themselves to standard six month policies, as the FCA focus evolves.
He said: “By preparing for a change in regulations now, dealers that invest in insured products alongside uninsured products are ensuring that customer requirements are met head-on. Used vehicles are far more likely to require extended warranty services over brand new counterparts, and it’s in the customer’s interest to ensure they are fully covered in the event of a mechanical breakdown or vehicle loss; particularly after the initial six months of purchase. Having an insured product option can be the difference in offering an advantage over competitors whilst providing a guaranteed safety net for customers.”
WMS Group supplies a wide range of trusted warranty solutions. As an FCA principal, WMS Group can authorise retailers as representatives to sell insurance products such as mechanical breakdown insurance, gap insurance, tyre and alloy wheel insurance, and SMART repair.