How much of an impact do automobile sales have on sales of related insurance products?
Senior executives of iA Financial Group discussed this topic with CIBC Capital Markets financial analyst Paul Holden following the announcement of the insurer's Q4 2020 results.
People might think that a downturn in car sales would automatically dampen sales of related insurance products. Not necessarily, say Denis Ricard and Michael Stickney, the insurer's president and CEO and chief growth officer, respectively.
New car sales are not the only factor to consider, Ricard says. The pandemic put the brake on sales in the U.S., a market that iA serves. However, used vehicle sales can also stoke sales of related insurance products, he adds.
In fact, the insurer saw sales rebound by year-end, Stickney says. He is confident that this upward trend will continue in 2021 as more and more people get vaccinated to protect against severe forms of COVID-19 complications.
Entrepreneurship a growth driver
Above all, car dealers are entrepreneurs, Denis Ricard points out. “We've seen in the past that when sales go down, the F&I's (finance and indemnities) office is also a source of profit for them. Car sales are an indicator, but the penetration rate of the products is also a very important one. Car dealers are trying to protect their profit margin by increasing penetration rate during, let's say, a time when car sales are down. That's another factor that seems to mitigate any negative impact on sales.”
A similar phenomenon emerged during the 2007 to 2010 recession, Stickney adds. “The penetration rates went up during that period just for [that] reason. The dealers had to make a living.”
Previously: Individual life insurance: Sales surge at iA Financial Group
