Tricolor Launches Auto Insurance for Low Income, ‘Credit Invisible’ Consumers  

The auto distributor’s insurance strategy uses data analytics-driven underwriting models to eliminate high origination fees borne by consumer.

(Image source: Tricolor homepage.)

Tricolor (Dallas), the largest U.S.-based used vehicle retailer focusing on the sale and financing of vehicles to the Hispanic consumer, has launched an affordable auto insurance option for low-income and “credit-invisible” customers through its affiliate company Tricolor Insurance. After testing the product earlier this year, Tricolor says it will begin rolling out the new insurance offering throughout all of its markets in Texas and California.

Daniel Chu, CEO, Tricolor.

“Car owners with limited incomes or credit histories are often forced to pay double the auto insurance rates of comparable coverage for mainstream credit consumers,” comments Daniel Chu, CEO, Tricolor. “We are committed to providing our customers with a trusted, high-quality and affordable car buying and ownership experience that extends from the moment they step into our dealership through vehicle ownership. Auto insurance is a critical part of that, and we are thrilled to offer a new lower cost alternative for deserving customers.”

The nonstandard auto insurance industry comprises approximately 30 percent of the $140 billion personal auto insurance market. It is highly fragmented with roughly 25,000 nonstandard agents across the country yet concentrated geographically, with Texas, California and Florida accounting for 52 percent of all direct premiums in 2017, according to A.M. Best.

Insurance agencies serving this customer segment often offset perceived cancellation risk by charging high origination fees. Tricolor’s strategy is to eliminate these agency fees—including point of sale, endorsement, and cancellation fees—using risk insights gained from its data analytics-driven underwriting models.

Pricing Transparency

“Pricing transparency is a significant component of delivering a compelling value proposition,” comments Mauricio Delgado, Chief Product and Strategy Officer, Tricolor. “We are leveraging the insights gained from providing affordable, high quality vehicles and financing to underserved Hispanics to provide a lower-cost alternative auto insurance option. Unlike agencies which must support high customer acquisition costs, our dealerships provide a robust lead generation channel, allowing us to deploy a lower cost model. Tricolor is uniquely positioned to draw on its brand, lead generation strategies, technology platform and back office capacity to scale this initiative as part of our broader financial services platform.”

Tricolor Insurance Agency, an affiliate of Tricolor Auto Group, currently serves as an agent for ten nonstandard carriers and markets its services throughout Tricolor’s 28 dealerships in Texas and, beginning in 2019, through its 8 Ganas dealerships in southern California. Currently available only to Tricolor auto purchase customers, the company plans to extend its insurance offering to all vehicle owners later next year.

Founded in 2007, Tricolor’s business model is to provide access to affordable financing on high-quality, certified vehicles in order to enhance the quality of customers’ lives and ultimately help them to build a better future. On a combined basis, Tricolor and Ganas have served nearly 50,000 customers and disbursed nearly $1 billion in affordable auto loans by using its proprietary model to segment risk.

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Anthony R. O’Donnell // Anthony O'Donnell is Executive Editor of Insurance Innovation Reporter. For nearly two decades, he has been an observer and commentator on the use of information technology in the insurance industry, following industry trends and writing about the use of IT across all sectors of the insurance industry. He can be reached at [email protected] or (503) 936-2803.

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