By Christopher Boyce
ST. LOUIS POST-DISPATCH
08/17/2008
Butch Suntrup has been selling cars since 1974, and has been a dealership owner since 1985.
But in April, he expanded his horizons to auto insurance. True, it's not that much of a stretch from his core business. For that reason, he chastised himself a bit when the idea first was pitched to him.
"I hit myself in the head and said, 'This a no-brainer,'" Suntrup said. "I was disappointed I didn't come up with it."
The expansion comes at a time when auto dealers need to create new revenue streams. Many dealerships are facing slumping sales due to the sluggish economy.
Beyond that, vehicle quality is steadily improving, so revenue from vehicle repair is expected to slip in the near future, said Mark Rikess, chief executive of dealership consulting firm The Rikess Group in Burbank, Calif.
For the next three years, "It will be survival of the fittest," Rikess said. "So dealerships, being entrepreneurially driven, will become more creative in finding sources for revenue."
Butch Suntrup and his brother, Craig Suntrup, jointly own three dealerships in south St. Louis County: Suntrup Hyundai, Kia, and Nissan-VW. They also own a mortgage brokerage business.
Butch Suntrup said his decision to begin selling auto insurance was not driven by fear of the slumping industry, but by excitement about the new business.
Chesterfield-based Equity One Franchisers LLC pitched the idea to Suntrup in late 2007. Equity One owns GlobalGreen Insurance Agency, an insurance-agency franchise that sells policies of well-known companies such as Travelers Cos., SafeCo Corp. and MetLife Inc.
It didn't take much to convince Suntrup of the potential value.
"It'll be as big as another auto store," he said of the GlobalGreen insurance franchise. "It'll never compare in revenue, but this will be more profitable because this has so many fewer employees."
His GlobalGreen franchise opened for business in April from an office in Creve Coeur, though Butch Suntrup said eventually it will place agents at his and his brother's dealerships. Dealerships owned by other Suntrup family members aren't involved in this insurance business.
The three Suntrup dealerships are the first area auto dealerships to open a GlobalGreen insurance franchise, but they aren't expected to be the last. Ray Spears, president and chief executive with Equity One, said his company already has sold a franchise to E$ell Express Classics & AutoSales, a dealer in Waterloo, and is working on other deals.
Outside of auto dealers, Equity One has sold eight GlobalGreen franchises.
In the early 1990s, many dealerships began selling their own insurance, according to Rikess. However, dealers ultimately struggled to inspire the kind of confidence consumers desire from their insurance companies.
"With insurance, the question is, 'When I have a problem, are they going to make things easy for me?'" Rikess said. "For most people, dealerships generally don't" make things easy.
Suntrup acknowledged this perception, saying he witnessed many leery customers when his dealership incorporated a mortgage brokerage in 2006.
But while some customers will balk at the idea of buying auto insurance at a dealership, Suntrup thinks more will appreciate the convenience of having all their needs serviced by one business.
"If they feel comfortable enough to spend $25,000 for a car with us, there is some level of trust," Suntrup said.
The dealership also will benefit from selling well-known insurance brands, said Art Spinella, president of consumer research firm CNW Marketing Research Inc. in Bandon, Ore. He said most auto dealers in the early 1990s were selling their own plans.
Still, it can be tough to woo consumers away from their existing insurers. Spinella said many people rarely switch insurers, assuming the discounts they get for renewing a policy earn them the best deal. However, he also noted that dealerships encounter plenty of first-time car buyers who have no established insurer.
Suntrup thinks there will be plenty of opportunities, saying his three dealerships sell about 500 vehicles per month. However, Suntrup said he and most of his employees are learning the insurance business, so he has taken on only about 120 customers thus far.
Still, Suntrup is careful not to spread himself too thin. He hired his daughter, Lindsey Suntrup, to learn — and eventually manage — the insurance business.
Lindsey Suntrup, 25, was never interested in selling cars but said she's excited about learning the insurance business and capitalizing on the complementary family partnership. She hopes the business eventually will grow into selling house, life and business insurance as well.
"I think we're on the cusp of a new era," she said. "So many companies are expanding horizontally instead of vertically to broaden resources for income."
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