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Protecting Your Assets in a Tumultuous Insurance Market

Dealers should consider how they have procured their insurance coverage in the past. It may be time to find a risk management consultant.

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In my July 2016 article in AutoSuccess titled “Insuring Your Inventory Is Getting More Difficult Despite a Soft Market,” I discussed the problems facing dealerships as they looked for insurance coverage on their inventory.

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The “rolling stock” inventory held for sale is frequently the largest asset at risk at any one dealership location. Even with the gorgeous new facilities the factories are forcing our dealer body to invest in, the values on the facilities likely pale in comparison to the values of the inventory at risk in that location. At the end of the article, I mentioned the need for the dealer to look around and ask peers to find options they may not have known existed. I stopped short and did not elaborate on the value an industry-specific consultant can bring to the table. However, given the recent developments among what had been the “go to” dealership insurance carriers, I feel it is now more important to outline what a dealership should do in the face of these market conditions and why a consultant can be vital.

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If you are not aware, Zurich North America has pulled out of offering insurance to auto dealerships in over 20 states and laid off a large chunk of their sales force of “dealership specialists” in North America. While they will continue to offer insurance to (and pursue) the “mega dealer” in many of these states, they are not interested in offering coverage to smaller dealers under 250 employees. However, they would still like to hound you for your F&I (warranty) business.

Additionally, Sentry Insurance, another well-known dealership carrier, folded its “dealership division” and any of their “specialized” representatives that made it through Sentry’s staff reductions are now being rolled into their “standard business products” divisions. This means the representative you know from your area (assuming he/she was not laid off) is now not only interested in pursuing your dealership but also widget manufacturing, contracting and non-auto related businesses. These agents’ focus has now shifted immensely.

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Apart from the direct writers mentioned above, we also see independent agents targeting dealerships. These folks’ very business model is designed to meet everyone’s needs big or small, personal or business. How many of these agents’ business cards list “home, auto, life and business insurance” as a way of advertising that they are jacks of all insurance types, but masters of none? While I have worked with and know of a few great independent agents who write some franchised dealerships, the depth of their understanding is almost always limited as is their access to any special “dealership” carriers and programs.

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Then there are the consultants. These range greatly in experience, scope and depth of what they can bring to the table to help dealerships in their overall management of risk. While the captive agents and independent agents mentioned above seem to focus on price while selling insurance, consultants focus more on the actual risks faced by the dealership and on how well the current and proposed programs will protect the dealership. Some agents will put themselves out in the market as being able to provide sound risk management to their insureds. But far too often this version of risk management is nothing more than a sell them every type of policy you can imagine approach in the name of “controlling risk.”

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Some “consulting” firms simply look at your current policy and recommend what they think you might need from their perch in an office five states away (or in the Rocky Mountains). They may issue “bid specs” or “Requests for Proposals (RFPs)” on the dealer’s behalf, asking for coverage that either does not exist in the state you operate or that is just not available from the half dozen carriers that might want to offer you a quote. While never having walked in your showroom or service bays, these consultants make good money prolonging the pain of procuring insurance for your dealership (as well as waste many an agent’s time).

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True risk management firms will meet with you first before they decide to offer their services. They walk your dealership facilities, meet your management staff and identify and analyze your needs to protect your dealership organization. Consultants should meet the fixed operations directors and the key personnel involved in helping to keep the “train on the track” from a safety standpoint. An industry-specific “risk management” firm should also be keenly aware of the market trends and all of the carriers that are available to provide a quote to a dealer.

Dealers reading this article should consider how they have procured their insurance coverage in the past. If it is a parade of different agents sending you proposals once a year before your annual renewal with no ongoing discussions for controlling risks throughout the year, it is time to find a risk management consultant. I recommend to any dealer that the process of looking for a risk consultant should be done independently from the craziness of your annual insurance renewal. If your policies renew in April, interview perspective consultants in August or September.

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No matter who you hire, be sure to call their dealership references and ask tough questions about their knowledge and service. You will feel more confident in the decision should you hire them. Nate Tallarino

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