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Successful automobile and truck dealerships must find ways to distinguish themselves from their competitors. While they are similar in some ways, it is very important to evaluate the individual risk characteristics of specific dealerships in order to really understand their insurance exposures and needs. New dealerships are much more similar to one another but each used dealership is unique.
The size and location of the operation does not determine the number of risk exposures present. Instead, the entrepreneurial spirit of the owner must be considered. What operations can be added to draw additional customers or generate additional revenue, and what skills are available to provide the needed services?
Agents who work with auto dealerships must be willing to stay on top of the changes in these operations…especially now! |
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Here is a possible scenario:
Helen carefully considered all of the options offered on the Internet and finally decided to purchase a Hummer. She liked the power and the profile and was willing to accept the gas mileage issue. The Internet directed her to Keil and Keil Used Cars as a possible place to find her perfect car.
Helen arrived at the lot with the information she had gathered. She talked with Mark, the salesman, about the exact car she wanted. They located it and she was thrilled. When she asked if she could test-drive it, he told her that she could even keep it over the weekend, as long as she completed some paperwork. A stroke of the pen and she was ready.
Helen jumped into the vehicle and took off. She was amazed by its power and fascinated with all its equipment. She was trying to get just the right balance on the sound system when she looked up, just before striking a stopped school bus.
The bus was badly damaged. Eight children and the driver were hospitalized but fortunately no one was killed. Because Helen was driving Keil and Keil’s vehicle, and because its policy had been properly endorsed, it responded to the accident. |
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According to Marvin E. McDougal, president of Automobile Risk Management & Insurance Services, Inc., the insurance marketplace for new car and truck dealerships is dominated by direct writers such as Zurich Direct, Sentry Select, Federated Mutual, American Hardware, and Harco. He notes that there are still many markets available for retail agents, including Argonaut, AIU, Scottsdale, Travelers, Liberty Mutual, Harleysville, Motorists Mutual, and Peerless.
However, the used auto dealership marketplace has a number of different players. Nathan Holt, transportation manager at Burns & Wilcox, mentions Burlington, Colony, Essex, National Fire & Marine, and Scottsdale. Douglas Setters, president of Creative Underwriters Corp., adds Heritage and Northfield.
Coverage is written on both an admitted and non-admitted basis. New car dealership liability coverage tends to be more in the admitted market, according to Mr. McDougal, but dealers' physical damage coverage is often written in non-admitted markets. Vince Duvall, transportation underwriter at Roush Insurance Services, Inc., says that many states require that liability coverage be written in the admitted market. However, states such as Indiana that permit use of non-admitted paper offer flexibility for hard-to-place risks.
Coverages offered and desired also vary between new and used car dealerships. According to Mr. Duvall, many small operations only want what is required to satisfy licensing, landlord and/or floor plan lienholder requirements. Dorothy Douglas, senior underwriter at London American Risk Specialists, Inc., explains that, while they are willing to offer additional coverage, “due to the high cost of coverage, we are seldom requested to do so. We write a large number of small, family-owned shops, and keeping their insurance costs down is a major concern.”
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