It seems like almost every day I read another headline about improved insurer profits, increased insurance and reinsurance capacity, and record broker profits. What does this mean for the dealer? Well, if this keeps up, it will result in more competition and lower premiums. Now don’t misunderstand me, I am not saying you should expect a big drop in your premiums next time around, but I am saying it looks like better days may be just around the corner. Premiums have certainly begun to moderate.
Insurance companies are really just financial cash machines. They take in your premiums, hold onto the money, and then pay out in terms of claims and expenses. The investment returns for the period they hold the money can have a dramatic effect on premiums and the overall competitiveness of the insurance marketplace. With the rebound in both stock and real estate markets, insurers are poised to become more competitive. While it may seem counter-intuitive, during these times of robust investments, many insurers will drop premiums in order to increase market share by acquiring more business. This is referred to in insurance lingo as a “soft market.” Are we in a soft market now? No, but we could be headed that way.
The dealership insurance market remains vigorous and competitive. There have been some changes that may ultimately change the dealership insurance landscape. We have seen at least one regional insurer pull away from writing and renewing dealership coverage. One auto inventory insurer has recently begun to refuse to write or renew inventory coverage alone, without insuring the rest of the garage insurance package. Another auto inventory insurer is being acquired by a larger insurer. Last but not least, one of the smaller national garage insurers is also being acquired. What changes these acquisitions and underwriting changes will bring, remain to be seen, but they will create turmoil and uncertainty for some.
Over the past couple of months, the outcomes for dealers bidding their coverage has changed a bit. First and foremost, we have seen average rate increases become much smaller, and in a few cases dealers are even paying less than last year. Second, insurers are much more likely to negotiate, but only if they think you have other, better options. This means that you must seek other bids so your insurer feels the competition.
As the insurance market continues to improve, you will not hear a lot about it until the improvement is old news. Don’t expect your agent or broker to run in next week and tell you he/she can cut your premiums, even if they can. When markets begin to soften, insurers are quiet so they don’t have to cut premiums any more than is necessary to keep your business. Don’t be surprised if next time around, your agent comes in and tells you that your premium increase will be minimal or non-existent, therefore there is no need to bid your coverage. This is just a ploy to keep you from finding out that other insurers may be even more competitive with both price and coverage. If you passively sit on the sideline waiting for the bad news, you have just played into their hands. Therefore, to take advantage of this improving climate you must bid your coverage so you can see all your options. Competition is a beautiful thing.
The rules for successful bidding are still pretty much the same as they have always been. Start your bid process about ninety days out. Be sure you have reviewed your loss runs for accuracy. Give explanations of large or frequent losses and what you have done to remedy the situation. Contact as many bidders as possible, even if it is just two or three, and be prepared to analyze the coverages as well as the costs.
If you follow this advice, you will be in a position to benefit from an improving insurance market long before it hits the news. Every dollar saved is a dollar of profit! Yes, I do think it’s a light…. Not a train.