Podcast: Versatile tenacity Auto industry trends | Zurich Insurance

Marie Knight is the Vice President of Strategic Services for Zurich North America’s Direct Markets business unit, where she is responsible for overall customer experience delivery. Her work includes engaging with current and prospective customers and overseeing the development of customer-focused products and services. She has been with Zurich for more than 25 years. 

Knight began with Universal Underwriters Group/Zurich in a role focused on Zurich’s acquisition and development of Finance & Insurance (F&I) business in Maryland, Delaware and Washington, D.C. Since then, she has held ascending levels of F&I and leadership positions in Direct Markets, including F&I Regional Administrator, Regional F&I Executive, Regional Sales Manager and Vice President of Strategic Relationships. Prior to joining Zurich, she was the Finance Director for a five-franchise auto group. She is a three-time President’s Club award winner, the annual award given for top sales performance in Direct Markets.

HOST:

As part of the Zurich North America Communications team, Stephani Gordon finds and shares stories by asking questions that connect people with ideas to pique curiosity, broaden awareness and create communities. Fondly considered a compassionate interrogator, she has coached executive communications for the CEOs of Zurich North America and Zurich Canada, lead C-suite video productions and connected employees with corporate strategy through storytelling and engagement. In addition to hosting this podcast, she unabashedly admits to spending too much time on TikTok in the guise of “anthropological study.”

EPISODE TRANSCRIPT:

PLEASE NOTE: This is an edited podcast transcript, capturing speakers with natural speech patterns that may include incomplete sentences and/or asides, grammatical errors, verbal shorthand and some statements that may be less clear in print.

STEPHANI GORDON: Hi, I'm Stephani Gordon. Welcome to Future of Risk presented by Zurich North America. We explore the changing risk and resilience landscape and share insights on the challenges facing businesses to help you meet tomorrow prepared. I'm joined today by Marie Knight. She's Vice President and Head of Strategic Services for Zurich's Direct Markets business unit. Welcome, Marie.

MARIE KNIGHT: Thank you, Stephani. Thanks for having me.

GORDON: Today we're going to talk about trends in the auto dealership. Marie, how long have you been in this particular market? So, it's safe to say you're an expert, but I don't know how long you've been in this field.

KNIGHT: Well, Stephani, I've been here longer than I care to admit. I am in my 30th year with Zurich and prior to that I worked in dealerships for a number of years, so I'm closing in on 40.

GORDON: That's fantastic. Well, we have a true industry expert with us then today. I can't wait to get into this conversation. To start off, Marie, can you give us kind of a highlight first of the trends that you and your team are seeing that are impacting dealers? What's top of mind, keeping them up at night and then maybe we can break them down one by one.

KNIGHT: Sure. So, I talk to dealers probably on a daily basis and I think what's top of mind for them right now and some of the things that are keeping them up at night are the challenges around hiring and retaining top talent. They're also concerned about maintaining margins and profitability, particularly with vehicle affordability and interest rates being what they are today. Then finally, concerns around identity theft in terms of cybersecurity risk.

GORDON: So, yes, I would agree that those are some big topics. We could probably spend a whole conversation on each one of them, but let's break them down and we'll start with talent. That's interesting and something I don't know if I've heard before with regard to a risk in the dealership industry. So, how is talent an issue for dealers and has this been going on for a while, or like me, is this relatively new that we're hearing about it?

KNIGHT: Well, actually hiring and retaining top talent has always been a challenge for auto dealers. According to a recent National Auto Dealer Association (NADA) study, the highest turnover rate is with sales consultants at over 70%, which is crazy.

GORDON: Year-over-year?

KNIGHT: Yes, a three-year retention rate is in the low thirties, which is really an alarming stat. and the consulting firm that does this annual survey for NADA estimated that employee turnover costs an average dealership around half a million dollars per year.

GORDON: That's amazing… Wow. Yes [that is a] major issue.

KNIGHT: So, I think it's clear to see why this is a top concern for dealers. While attracting, hiring and retaining salespeople, is an age-old problem, over the past few years, it's been eclipsed by the challenge of finding and keeping service department technicians.

GORDON: How much of that is because they're becoming so specialized? I think about the way vehicles are put together now and they're so computerized and that's not even then touching on the highly specialized field of electric vehicles.

KNIGHT: I think that's a big part of the challenge. I also think that historically there have been enough techs to go around and now with the industry growing and the specialized needs of EVs (electric vehicles) and so much change in the industry, it's certainly become even more of a challenge. Dealers have had to get creative about where they go to find their talent and really think outside the box in terms of developing talent in other ways than we've done historically.

GORDON: Do you have any recommendations about what dealers could or should do, either in terms of recruiting or retention or incentivization?

KNIGHT: Dealers who are succeeding in their employee and retention practices are thinking outside the box. They offer creative and competitive pay — that's sort of table stakes — but then they are also prioritizing, developing and maintaining a culture that's both inclusive and engaging. That prioritizes career paths and development opportunities, as well as offering forums to share ideas and feedback and having fun recognition programs. They consider flexible work schedules whenever possible and prioritize making employees feel connected to the business and valued for their contributions.

GORDON: It's not the dealership model that we probably remember — as you said — when you got into this business.

KNIGHT: It's certainly evolved over the years, that's for sure.

GORDON: Absolutely. So, the second thing that you mentioned was margins and profitability, interest rate hikes, etc. What's the nature of that risk?

KNIGHT: Well, vehicle sales volume is at risk of being disrupted because of higher interest rates and vehicle affordability. Cox Automotive recently stated that the average transaction price was over $47,000 and the average monthly payments were $751. Considering the fact that the average household income is just above $68,000, that is concerning. Dealers are concerned that these factors will reduce the number of consumers who buy a new vehicle out of desire rather than need. So, while there's been an uptick in the number of buyers who pay cash for cars, many who rely on financing are holding out. They're hoping that the Fed [Federal Reserve] will deliver on their signal that interest rate cuts will be coming at some point this year.

GORDON: Well, and people are also making choices. They have to start making choices about how these fed money and what's necessary and then what can be put off for a while.

KNIGHT: Yes, absolutely. The good news is it's not all doom and gloom though. Dealers have more inventory than they've had over the past few years. A lot of manufacturers are offering special incentives and programs and there are some good lease options available. So overall, I think the outlook continues to be positive.

GORDON: Excellent. So, the last of the major threats that you talked about was cyber security risk [and] identity theft. Most people know dealers have [an] issue with physical theft and we did a pretty interesting podcast about a year ago talking about all the aspects of physical theft, as risks to dealerships. But how are they being affected by identity theft?

KNIGHT: Well, I would say this has been an emerging risk over the past few years because dealerships are an attractive target for cyber criminals for a number of reasons. First, hackers often gain access to a high volume of customer’s personal and financial information.

Second, dealerships are usually busy with their daily demands of business and it's not uncommon for them to have system vulnerabilities. Some dealership personnel can have lower awareness of cybersecurity threats and this is problematic, obviously.

Then there's also the extensive use of technology and lots of interconnected systems. So, you combine all that with cyber criminals targeting dealers because they believe that they'll pay a high ransom quickly to avoid reputational damage and all of that combined creates a big concern for dealers.

GORDON: Sure. Obviously, if you're a Mega Dealer, you can probably afford to have someone dedicated just to keeping an eye on these things. But, if you don't fall into that category, then this is probably something you can't afford a full-time individual to be protecting your cyber [security]. So, you're trying to become well-versed enough in this. But [this is] still a vulnerability, obviously.

KNIGHT: It is. The good news is there are a lot of resources available to dealers to help them with this. Regardless of their size, there are different companies, vendors and providers available who can help dealers put processes in place to protect themselves.

GORDON: That is good to know. Thank you for sharing that. So, we talked about some pretty big risks but I know there are secondary issues that are also impacting the dealer community to various degrees. Can you touch on a couple of those as well?

KNIGHT: Sure. I would say consolidation is a hot topic in the industry right now. A lot of large dealer groups and public companies are buying up dealerships, which has pros and cons. Certainly for smaller dealers who don't have succession plans who are looking to exit the business, this is a great opportunity for them to sell. For smaller groups or individual dealers, it's an opportunity for them to brand themselves within their community. For consumers, I think that it is overall a good thing and I think that it's something that's going to continue and something for us to watch as the industry continues to evolve.

Another thing that I think is probably something to think about is how the industry is impacted by the pace of change in the world and the economy overall. Certainly, that's something we touched on in talking about vehicle affordability and interest rates. But I think that dealers have proven to us over and over their ability to adapt and thrive despite what's happening in the economy and the world.

So, I remain optimistic about that. I'd say overall the auto industry will continue to do well because transportation is something everyone needs. So, while we can live without certain things, most people need a vehicle. And so having dealerships around is incredibly important to our survival. So, I think that continues to be a positive both for consumers as well as for car dealers.

GORDON: Right. There's kind of been an underlying theme, Marie, in a lot of the things that you've touched on today which is resilience and adaptability. Maybe to more of us than usual it became obvious during the years of the pandemic and immediately following when we saw so many supply chain issues and distribution issues. We became aware of the challenges facing auto dealers in a way that we maybe usually don't see. What have you learned or seen in working with dealers as they experience all those kind of challenges in terms of dealer resilience or this field's adaptability?

KNIGHT: I think about what a catastrophe the pandemic could have been for auto dealers and for the industry overall and I was once again impressed by their ability to find new ways to continue to do business. Whether it was finding ways to sell vehicles without having any personal contact with their customers. Having to find a way to do a virtual sale or a video chat to review contracts and go over all the options that were available to a customer. To finding new ways to deliver vehicles to them. To just finding inventory that became more and more challenging as the pandemic went on.

We started to feel the strain of supply chain challenges. Yet, as I mentioned before, dealers seem to be remarkable at not only surviving, but learning to adapt and then being able to thrive. That's one of the things that I love most about the industry.

GORDON: That's been a really interesting overview of the auto dealer markets. So, thank you for sharing the insights and the challenges. And you've mentioned lots of bright spots, but your specific area of expertise in the auto industry is called “F&I.” And maybe we could spend just a couple minutes…if you could define for the average listener, most people know what that is, even if they don't know that they do, but talk about that just a little bit.

KNIGHT: Sure. So, most simply “F&I” stands for finance and insurance. And some people think about it as the not-so-fun part of buying a car. It's not the exciting part where you get to pick out the color of the interior/exterior [and] all the features of the vehicle.

It's where you actually finalize the transaction and do the paperwork and review all the terms and conditions. It's also the part of the transaction where the business manager has an opportunity to present the customer with products that can protect their purchase, whether it's a vehicle service contract that protects the mechanical components of the vehicle.

An appearance package that can keep the vehicle looking new throughout their ownership time or gap protection that will cover the customer's finances if they end up having their vehicle stolen and not recovered or totaled in an accident.

There's usually a difference between what an insurance company will pay and what they owe the bank. The gap coverage would cover that. So, there are all sorts of benefits available to customers that the business manager can present to them in conjunction with the purchase of their vehicle and give a consumer the opportunity to pick and choose what best fits their needs and their budget.

GORDON: That's a really helpful overview, thank you for going into that level of explanation. What are the issues that you're seeing in the F&I space? You know, we're talking about future of risk today.

KNIGHT: Yes, so that's a great question, Stephani. I would say probably two major areas, certainly. One is always around regulatory compliance and making sure that dealerships are offering everything to the customer in a full disclosure manner, and allowing customers to make a decision that best suits their buying needs. This requires a good awareness of all of the laws and regulations that are related to the purchase of a vehicle.

Then the second area is the one that we've talked about quite a bit already and that is the affordability and customers already having to worry about their monthly payments and their budget. Then if they are already stretched with the high interest rate to pay for the vehicle, do they have enough room in their budget to consider some sort of vehicle protection product, which may increase their monthly payment.

While that can be overwhelming when purchasing a vehicle, if they don't take advantage of it at the time that they buy their vehicle later on down the road, if they have an issue with the vehicle breaking down or some other tire and wheel problem or have an accident and end up with a deficiency balance, all of those things can be an even bigger problem. So, the business manager then has to balance really showing the value of these products to the customer and helping them decide what makes the most sense for them.

GORDON: Sure. That's absolutely understandable. Like you said, repeatedly, even facing those issues can be pretty sure that the dealers will show their resilience and be flexible in how they approach the issues facing their customers, right?

KNIGHT: Yes, certainly. There are other ways that they can help customers purchase vehicle protection products outside of the financing. So, you know, that speaks to dealers adaptability and finding ways to make it work for both their profitability as well as for what's best for the car buyer.

GORDON: Very good to know. Thank you. I do have one last topic that I hope we could talk about just a little bit. When this airs, we will have just had Women's History Month and it made me think that the auto industry isn't typically been a place where we find a lot of women. We talked about…you've been in this industry for close to four decades, but that's actually pretty rare. I would love to know what was it like when you entered this industry and also what drew you to it at a time where there could not have been a lot of role models?

KNIGHT: That's an interesting question. Initially, I was drawn to it because I had taken a part-time job answering phones in a dealership, having no idea what the industry was about. I just found the whole thing energizing and infectious. I loved everything about it and I love the idea of helping customers buy a car. I've always thought that was really fun. I enjoy buying cars and I wanted to make it an enjoyable process for others. So, that's how I was in initially drawn to the auto industry.

Then I transitioned to a role at Zurich where I was one of the only females for a very, very long time and it was a great opportunity to make a name for myself and to show that women can do extremely well in this business. So, I'm happy to say that many, many years later there are a lot more women and many women dealers, many women mega dealers who are incredibly successful and impressive. I just feel very proud to be a part of this industry and hope to be a small part of attracting a lot more women and others to the business that has brought me not only a great living, but a lot of fun and joy over the years.

GORDON: I think it's safe to say you've been a pioneer in this field. I'm curious, what kind of challenges did you face or did you need to overcome in order to not only stay because you liked what you were doing, that's what drew you to it, but to be successful?

KNIGHT: There were certainly some challenges along the way. I guess the biggest one was to be taken seriously. Certainly, in the beginning I was on the young side and I worked with a lot of older men. Most dealers at the time were older men. So, I really had to quickly prove myself and show that I knew what I was talking about and that I was able to bring them value. I think that I was successful in achieving that.

GORDON: That's excellent. And it's good to hear that at least they were open to that. You mentioned that you hope there's a lot more women who are interested in entering the field or field adjacent. Why do you think it's important to have more women or really more diversity in general in the auto industry

KNIGHT: I think it's important that dealerships look more like their customers. I think we all know that women make most of the buying decisions. So, I think that having women and other diverse groups as part of an employee team helps to create more diversity of thought, which leads to a higher level of success. I think it's also more appealing to consumers. I think most of us are drawn to businesses where there are people working there who look and feel like us. I think that is the right thing to do. I think that everyone benefits more from it and it's a win-win.

GORDON: I think you're spot on. I'm reflecting because I leased two cars relatively close together a couple years ago. One of my experiences, especially when I got to the end — to the financing piece of it… to the F&I— unfortunately, I had brought my son (laugh) and his girlfriend along to help teach them about car negotiation and what's the buying process or leasing process in that case. I wanted them to have that experience as young people so when they go do it on their own, they have a model of some kind.

The guy who sat across the desk from us in the F&I process — it was the end of the day and we'd been there for a really long time. We were tired, the kids were hungry— he was an absolute bully. He was so patronizing and he was so flippant. If we had not already invested so much of the day, I absolutely would've walked away. To this day, I will tell people the name of the dealership, the name of the car brand, [and tell them] don't ever do business with them. It was such a terrible experience. I thought, who is setting the tone for this dealership that that's an okay way for someone to behave at the end of this experience?

Another dealer I went to —I did have a woman who was my sales agent — it was a completely different experience and I felt seen. I will definitely, go back just based on the experience and I think that's what you're talking about.

KNIGHT: Yes, definitely. First of all, it saddens me to hear that you had that experience. Thankfully, I will say that most dealers that I have the good fortune of working with would not tolerate that type of behavior and would not want to have any customer treated that way, whether it be by a man or a woman.

GORDON: Sure, sure.

KNIGHT: Whether the customer was male or female, it really should have no bearing on it at all and thankfully most dealers recognize the importance of having customers who not only have a great experience. But who will talk about it and who will be loyal to their dealership and their brand for years to come. So, I think that most dealers today recognize how important that is. As a result of that, are working hard to make sure that their staff is more diverse and that their staff is trained in providing an excellent customer experience.

GORDON: That's good to hear. I'm glad to know that broadly across the industry, you're seeing that trend because obviously my car buying or leasing experience is pretty small but you are spot on that I definitely do talk about it (laugh). There were two very different memorable experiences. But along those lines maybe one final question. Do you have advice for women or other groups as you've mentioned, that aren't traditionally or haven't been traditionally represented in the industry? Although you say that that's a good trend that's changing. Do you have any advice for someone who's considering whether they might want to try a career in this field?

KNIGHT: I do and my advice is simple. It's “go for it.” Dealers want and need to hire different people. So, if you've ever thought about it or if you haven't ever thought about it, you should, because it's a fantastic industry. There's so much opportunity there. You can build a tremendous career. I am a testament to that. I can't imagine having done anything else over the past 40 years and have had as much fun and have made as good a living as I have.

So, I couldn't recommend it more. I hope anyone listening to this will consider a career in automotive and talk to dealers and learn more about the business and then just take advantage of the opportunities that are available.

GORDON: Marie, it's been such a pleasure. The depth of your experience and your knowledge across this industry has been really interesting to get to hear your perspectives about the past and the future and the trends that you're seeing, etc. So, thank you so much for being a guest today and sharing your stories and your experiences. Really appreciate your time.

KNIGHT: Thank you, Stephani. It's been my pleasure.

GORDON: Thanks Marie and thanks to our listeners. This has been Future of Risk presented by Zurich North America. If you like the show, please leave us a comment or review wherever you get your favorite podcasts. Or you can drop us a note at media@zurichna.com and we hope you'll join us for future episodes. Thank you.