Dealer Reinsurance Due Diligence

Documents to request.

Ask for these up front. What arrives easily, and what does not, tells you about transparency before you have read a single line.

• The complete, itemized fee schedule, with who receives each fee.
• A sample statement and the standard reporting package.
• The governing agreements for the structure and administration.
• The claims handling process and dispute procedure.
• The reserve methodology: how earned and unearned are treated and where funds are held.
• The identity of the obligor and the insurer behind the products.
• The investment approach for reserves, where applicable.
• Any compliance filings and the elections the program relies on.

Questions to ask.

A short core set. For the full question library across structure, fees, products, and exit, see the questions guide.

• Why is this structure and this administrator recommended for my dealership specifically?
• What are all fees, and who is paid for each role in the program?
• How are claims adjudicated and paid, and how quickly?
• How are reserves set, held, reported, and invested?
• What will I see on a statement, and how often?
• Who is the obligor, and who is the insurer?
• What performance reviews are included after setup?
• What happens to reserves and open claims if I grow, sell, or change providers?

Expand this with the full questions to ask about dealer reinsurance and the administrator evaluation framework.

Reports to review.

A statement should let you get from premium to a clear net position. If it cannot, that is the finding.

• Premium written and earned for the period.
• Claims paid and the loss experience by product line.
• Reserve balances, split into earned and unearned.
• Every fee deducted, itemized.
• A clear net position after all fees.
• Investment performance on reserve assets, where applicable.
• Cancellation and chargeback activity.

For how to actually read these figures, see reporting, explained and costs and fees explained.

Warning signs.

None of these alone proves a poor program. Each is a reason to slow down and ask more before you commit.

• Fees are described as “standard” without a full, itemized schedule.
• No sample statement is available before signing.
• Claims handling or reserve methodology gets vague answers.
• Statements show gross premium but never a clear net position.
• The obligor or insurer is not clearly identified.
• Performance reviews are offered only as an upsell.
• Projections are shown only as a best case, with no downside range.
• You are discouraged from having your own advisors review the arrangement.

Common omissions.

These rarely appear in a proposal because they matter at the end, not the beginning. Ask about them early.

• The runoff treatment of existing contracts if the relationship ends.
• How open claims are handled during a transition.
• Whether the administrator and the obligor are the same party.
• The full cost at renewal, distribution, and exit, not just at setup.
• Who controls investment decisions on reserves.
• What ongoing training and support actually continue after onboarding.

Board meeting discussion topics.

For dealer groups and boards, a short agenda that keeps the program in front of the people accountable for it.

• Is the program building value the way it was intended to, on the numbers?
• What did the loss experience and reserves do this period, and what does that imply?
• Are the fees still justified by the value delivered?
• Are there transparency or reporting concerns to raise with the administrator?
• How does the program fit growth plans, added rooftops, and succession?
• What decisions, if any, should we make before the next review?

Controller checklist.

The reconciliation work that keeps the numbers honest between reviews.

• Reconcile the statements against the store’s records.
• Confirm every fee on the statement matches the agreed schedule.
• Track earned versus unearned reserves over time.
• Verify claims and cancellation activity ties out.
• Flag any figure you cannot source or explain for the review.

Owner checklist.

The questions an owner should be able to answer without hesitation.

• Do I understand why this structure and administrator were chosen?
• Can I read my own statement and explain the net position?
• Do I know who is responsible if a claim or a customer issue goes wrong?
• Is the program aligned with my long-term and succession goals?
• Have my own tax and legal advisors reviewed it?

Implementation checklist.

Once you have chosen, these steps set the program up to be reviewable from day one.

• Confirm the fee schedule and reporting cadence in writing.
• Set the calendar for statements and the annual review.
• Identify the point of contact for the dealer and for claims.
• Establish who at the store owns reconciliation and reporting.
• Document the baseline so the first annual review has something to compare to.

Transition considerations.

If you ever move administrators or providers, plan the transition before you make it.

• Get the runoff treatment of existing contracts in writing before you move.
• Confirm how open claims will be handled during the overlap.
• Understand how existing reserves are treated and when they are released.
• Plan for a period where old business runs off while new business moves.
• Coordinate the change with your tax and legal advisors, not around them.

The mechanics of switching are covered in when to switch programs and exit strategy and succession.

Frequently asked questions.