The insurance world is full of “gotchas.” There are “gotchas” in coverage. There are “gotchas” in premiums and there are “gotchas” in claims adjustments. While the glossy presentations agents drop on your desk make dealership insurance look simple and easy, wrapped with a bow it is anything but simple and easy. Here is the problem. If you’ve never had an unexpectedly uninsured claim or aggressively bid your coverage you may think you have the right coverage at the best price. As someone much smarter than me once said, “You don’t know what you don’t know.” So here are a few potential “gotchas” we see fairly frequently.
Are you letting one agent control too many bids?
There are a number of new and aggressive carriers looking to write dealership business. Most are writing through brokers and are not direct writers like Sentry or Zurich. Generally speaking new carriers are a good thing. To get you to move your business, their coverage should be as good or better and their pricing will definitely have to be better. New competition can drive premiums down. But to create competition, you need to invite these new carriers to your bidding party. Here’s the “gotcha.” Often two or more of these carriers can be represented by the same broker. If that’s the case, the broker, not you, is in charge of the bids you see and it makes it more difficult to create a truly competitive biding process when the broker holds the cards. At Austin Consulting, we try to assign as few (one if possible) garage insurance companies to each agent. While it means you have more agents and brokers to manage, it also means you will create the greatest competitive environment and the highest possibility for savings.
Is “low-balling” inflating your premiums?
Premiums, the actual premiums you pay over the course of the policy can be another “gotcha.” At the end of a policy year, have you ever added up the premiums you paid and compared it to the quote you received at the beginning? We’d recommend you do this little accounting exercise and see what happens. If you’ve grown, expect a higher total. If you have still been cost cutting, the premium should be a little lower. However, you may find your employee counts and inventory levels were stable but your total premiums are higher than the original bid. If that’s the case you may have been “low-balled.” We see this every day. You can tell the agent exactly what you expect your exposures to be over the next year and they still use employee and inventory counts based on something they made up. Often incumbents will use an average from your past year. If you are in a growth mode, that is a recipe for big additional audit premiums or monthly adjustments. It also means you may have chosen a bid that appeared lower but ended up more expensive than other bids that did use the right exposure base.
Are you paying what you should be paying?
Speaking of monthly adjustments or reports, take the time to check the rates your insurer is using to adjust your premium. Take the rates and plug in the employee counts and inventory levels you gave at the beginning of the year and see if the annual premium matches your original quote. Don’t be surprised if you are, well, surprised. If you are with a carrier that does monthly adjustments based on your reports, be sure to get the rates the carrier is using to adjust your policy so you can really compare what you are paying to your original quote.
Does your policy accurately reflect what you thought you bought?
When renewal time comes around and you have three, four or five quotes to compare, it’s hard. We know because that’s what we do for our clients. Usually you narrow it down to one or two bids and negotiate. You are negotiating premium but also maybe deductibles, exclusions and other policy nuances. Here’s the “gotcha.” Did those negotiated items or even quoted policy changes make it into the actual policy? In our experience, they often do not. That is why it is critical that you review your policy carefully. We find that there are usually anywhere from four to ten errors in every policy we review. It could be a building was left off the schedule, deductibles were higher than agreed, an important exclusion was added that was not in the quote or the premiums don’t add up as quoted. There are hundreds of other examples. The longer the policy sits unchanged, the less likely you are to win the coverage or premium argument should you have a claim or premium issue down the road.
Could your growth cause you to suffer a co-insurance penalty?
There are far too many coverage “gotchas” for this article and we have discussed many of them in past pieces. With that said, here’s one to look out for, especially if your dealership is growing again. Ask your agent if your auto inventory has a co-insurance clause. Remember, in property insurance, co-insurance is a penalty deducted from your claim for under insurance. If you properly report your inventory monthly this is not likely to be a problem. However, if your policy uses a non-reported inventory level and you are adding inventory over the year, you could have a big problem. Here’s an example: let’s say you have $3,000,000 of auto inventory insured at the beginning of the policy. Near the end of the policy period you have $4,000,000 and the big hail storm hits. When the co-insurance penalty is applied, you could have your claim payment, after deductibles are applied, reduced by as much as 25% because your $3,000,000 limit is only 75% of your current inventory. “Gotcha!”
Dealership insurance is anything but simple. Every policy has its pros, cons and nuances that can be a “gotcha” if the circumstances are right. It pays to stay on top of your dealership program all year long, not just at renewal.