Even with a wave of consolidation through the industry, the number of new and used auto dealerships in the U.S. is close to 100,000, meaning most independent agents have multiple dealers in their own backyards.
“We have been able to find coverage for a variety of auto dealers, from a small mom and pop used car dealer to a dealer specializing in fire trucks or ambulances,” says Jon M. von Arx, vice president. J. L. von Arx & Associates in Long Beach, Calif.
Car makers including GMAC and Ford offer their franchisees financing and insurance packages for their new vehicle inventories. However, independent agents can and do compete for this insurance business by offering dealers better deals than the car makers on the new car coverage and by offering insurance programs that go beyond just new car inventory protection.
A car dealer’s inventory of new versus used vehicles is a key consideration in any insurance program, as is whether a dealer has an open lot or building. Dealers with open lots must contend with weather exposures.
Theft is an obvious issue and rates reflect the theft risk of certain territories. “We judge our auto dealer clients according to the number of employees, territory and Zip Code,” explains Diane Nagby of Cal-Regent Insurance Services Corp. in El Cajon, Calif. “An auto dealer in downtown Los Angeles would be quoted a much higher quote than one in San Diego.”
Cal-Regent writes auto dealers in California and Arizona, with plans to expand to Nevada and Washington. The policies are with State National Insurance Co.
In addition to being an indicator of theft exposure, geography is also a major underwriting consideration given the risks of weather-related damages from snow in the north, midwest and northwest; wind, rain and hurricanes in the southeast; and rain and tornadoes in other parts of the country.
“Theft is the most common claim car dealers encounter but when it comes to the big dollars it is hurricanes and hail. If a hurricane is coming, if a dealer is in a flood zone, they contract with elevated parking structures or a lot on higher ground. They bunch all their cars together, placing the older cars on the perimeter to protect the newer, more expensive ones in the middle from the wind. A lot of the damage comes from wind-blown gravel that tears up the cars’ paint,” explains Dan Hubbel, who is with large broker Willis.
Willis offers a program for dealers of new and used autos with open lots and represents DaimlerCrysler Insurance Co. as an exclusive managing general agent. Its main program, DealerGuard, provides broad physical damage protection and is available on an admitted basis in close to 40 states and on a non-admitted basis in most others. In addition, Willis Programs offers The HailExchange, a monoline coverage for dealers located in hail-prone geographical areas.
According to George Clarke, DealerGuard executive vice president, The HailExchange gives agents a source of dealer open lot coverage even when a dealer has just suffered a multi-million dollar hail loss.
“At this point in time everyone is cognizant of the fact that property insurance is at a premium or non-existent in the Gulf states especially in Florida,” Clarke said. “DealerGuard, however, remains wide open for business and still at reasonable pricing and terms.”
Like most businesses, car dealers should also buy general premises liability, fire, employee dishonesty, errors and omissions, business interruption and workers’ compensation insurance.
Dealerships that in addition to selling also perform auto repairs–and most do–face additional exposures and require special insurance considerations.
Product Liability and Completed Operations protects the business in the event a customer is harmed by a faulty repair or part. Garage Keepers Legal Liability covers for damage caused by employees to customers’ automobiles.
Many dealerships in the repair business are also advised to carry pollution liability coverage if they have gasoline tanks on their premises and if they are disposing of motor oils and tires.
Insurance Services Office has an Auto Service Risks package as part of its Market Segments program. Through this, ISO carriers get policy forms, rules, and loss costs to help them offer specialized policies to this class of business.
A number of national and regional carriers, including Farmers, Federated and AIG have packages aimed at the auto services market. Zurich’s Universal Underwriters specializes in insurance for the auto industry. Lexington, Scottsdale and others also provide coverage for the market. The complete list of providers is a long one.
There are many brokers and programs managers who deal with car dealers. To name a few:
Carter Insurance Group by (www.carterinsure.com) out of Tampa, Fla., is underwriting manager for the CAR-PAC program.
Creative Agency Group (www.creativeagency.com) in Holmdel, N.J., markets the Distinguished Dealer Program, which is underwritten by Peerless Insurance.
Out of Stockton, Calif., is Automotive Risk Management & Insurance Services Inc., (www.armonline.com) which focuses on the transportation industry. ARM’s Web site is worth the visit for its slideshow on The Art of a Fabulous Package Submission.
J. L. von Arx & Associates in Long Beach, Calif., offers non-admitted garage liability coverage for dealers in California and Arizona; and admitted garage liability coverage in California. It has several programs for high valued dealer inventory and high value garage-keepers exposures that pay 7.5 to 10 percent commission.
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