CDK's Salty Closure: Unmasking the Reality of Embedded Insurance in Auto Dealerships

Automotive News announced on July 28th, 2023 that CDK plans to shut down Salty as part of an effort to “focus our investments on innovation and market growth.” The news has certainly sparked a stir in the industry. However, for some insiders like Gather, this move doesn't seem as shocking. Led by CEO Jim Maxfield, Gather is shining a spotlight on the gritty truths of embedded insurance in dealerships.

Taking a brief walk down memory lane, Salty Dot Inc. joined forces with Purple.Insurance before becoming part of CDK's portfolio less than two years ago. At the helm of Purple.Insurance was Jim Maxfield, now Gather’s CEO. With firsthand experience in the arena of embedded insurance, Maxfield offers a unique vantage point.

“The notion of embedded insurance … is proving not to be successful in retail automotive,” Maxfield told Automotive News. 

In a recent LinkedIn article titled “I was wrong about embedded insurance,” Maxfield provided a threefold explanation for this situation. Firstly, selling insurance in-dealership tends to dampen car deals. As consumers calculate their total spending on a vehicle - the car payment coupled with insurance costs - their willingness to spend on the vehicle itself or on additional F&I products decreases.

Secondly, selling insurance requires the dealership to implement numerous processes to comply with the stringent regulations governing the insurance industry. The complex nature of these processes can pose significant operational challenges for dealerships.

Lastly, the proportion of customers needing to purchase insurance during the car buying process is surprisingly small - merely 3-4%. While a few customers can be nudged to shop around, most prefer to stick with their current insurance carrier. As such, the potential market for in-dealership insurance sales is relatively limited.

Armed with firsthand experience of the challenges that embedded insurance brings to dealerships, Maxfield founded Gather, a company that boldly brands itself as the 'anti-embedded insurance solution'. While embedded insurance models have attempted to integrate insurance shopping into the car buying process to create an additional revenue stream for dealers, Gather adopts a contrasting strategy. By completely eliminating insurance shopping and instead automating the validation and update process of a consumer’s existing insurance - Gather not only streamlines the process significantly but also generates comparable recurring revenue for dealerships.

Reflecting on the winding journey of CDK's Salty, the industry has learned some hard truths about the practicality and profitability of embedded insurance within dealerships. Gather offers an alternative solution that addresses dealership pain points while maintaining revenue streams. The approach of Gather as the 'anti-embedded insurance solution' signals a significant shift in the industry and might be the new road map for dealerships navigating the intricate intersection of car sales and insurance.