As a seller of warranty products you want to get the most amount of revenue from a provider that you can. After all, it is your customers we are serving. A profit participation program can help you make sure that after the claims are paid on your program, the underwriting profit becomes yours. At Capital Home and Auto, we can help you create your own custom strategy for profit participation that ensures your program is set up for success and customized for your unique business needs.
What is Profit Participation?
Profit participation is a form of reinsurance, or a type of arrangement where an insurer or lender transfers risk to another lender to provide protection against the risk of the first insurance or claim being filed. In simpler terms? It’s insurance for insurance companies. By sharing the financial risk associated with warranties for cars and homes, you can mitigate the risk and maximize your profit.
There are two kinds of profit participation programs: reinsurance and retrospective. In a reinsurance plan, the company is in charge of its insurance company and is able to accept premiums from warranties and other aftermarket agreements. These companies hold on to the premium reserves and make investment income from the reserves, which can help create long-term profitability. In a retrospective plan, the administrator of the program is able to hold on to premiums and allow the sellers to access 80% – 100% of the underwriting funds on scheduled payout dates.
There are a few other key terms that you should be aware of when working on a profit participation program at your business. It’s helpful to be aware of the different types of reinsurance companies you might deal with. But don’t get overwhelmed by the acronyms—Capital Home and Auto is here to advise you on the best options and get your profit participation program up and running. The types of reinsurance companies you might come across are:
- CFC: Controlled Foreign Corporation
- NCFC: Non-Controlled Foreign Corporation
- PORC: Producer Owned Reinsurance Company
- PARC: Producer Affiliated Reinsurance Company
- ARC: Allied Risk Company
- DORC: Dealer Owned Reinsurance Company
- DOWC: Dealer Owned Warranty Company
- DOOC: Dealer Owned Obligator Company
- Hybrid: DOWC assumes the obligations of a different warranty company
Why You Should Consider Profit Participation Programs
Some businesses, particularly auto dealers, might struggle with the idea of a profit participation program. In the past, when reinsurance was instituted, there could be times when the claims exceeded premiums and the dealer was left with the responsibility to make up payments. Today’s programs, however, have evolved to reduce the risk of loss on the side of the lender and, instead, drive profit growth for the business.
Profit Participation at Capital Home and Auto
At Capital Home and Auto, we help support you in every step of your profit participation program creation. Our team has experience in setting up a number of profit participation programs, so we have the expertise to help you make sure you get your insurance profits and can grow your business. We can help with the strategic planning and execution of your profit participation program, as well as the ongoing management.
Capital Home and Auto understands how confusing profit participation can seem, and that’s why our team is prepared to help educate and advise you on what should be done to increase your profitability and see returns on your risks. We can help you establish your reinsurance companies and give you the administration and accounting tools you need in order to manage payments and other important information. We can help you plan out your growth for profit participation and give you strategic advice on what moves you can make to improve your efforts. We can also connect you with other programs and help you with reporting, financial statements, and tax returns.
Partner with Capital Home and Auto Today for Profit Participation Opportunities
At Capital Home and Auto, we want to help you grow. From giving you the policies and products you need to meet customer demands to setting up your own profit participation program from scratch, we are dedicated to seeing every project through with you to the end. That’s why our team is so excited by the potential to work with new customers and help your business scale over time.
When you partner with Capital Home and Auto, you are gaining a real partner who is there to offer support, tools, and advice when needed. Our expert staff knows how to help you find the best warranty solutions for home and auto, so don’t hesitate to reach out and see exactly how a partnership with Capital Home and Auto will improve your relationships with customers and increase your business profitability.
