Preparing for an insurance bid process or even your renewal can be time consuming. It seems like every insurance company has their list of required information. The reality is that the majority of the information is required by all insurers.
But, what are they looking for in the information you provide? How can you show your dealership in the best possible light?
While the list of required information below is far from incomplete, here are some insights into specific requests:
Financial statements are often a bone of contention. Many dealers do not want to release them, but in today’s insurance market many insurers require them. For starters, the insurance company is concerned about solvency. When dealers are losing money often losses increase because loss control can take a backseat to more pressing matters.
In addition to profit and loss matters, financial statements provide insights into proper business interruption levels, contents values and auto inventory levels. For dealers who are concerned about the privacy of their financial information, most insurers will allow you to provide financials directly to the underwriter, bypassing the local agent.
Loss runs should be dated no older than 90 days prior to expiration. Most insurers require the current year’s losses and three full years back. If the loss run is clean then providing the raw data may be enough. If however the dealership has experienced a large loss(es) or frequent losses, more detail is in order.
Include with the loss runs an explanation of any large losses, the circumstances that created the claim and new loss control procedures put in place to reduce the chances of another claim. Frequent similar claims, even small claims, including stolen vehicles or auto accidents can be a signal to the underwriter that the dealership does not take loss control seriously. If the dealership suffers from a loss frequency problem it is paramount that all insurers understand the steps taken to stem future claims.
Building and contents inventory seems obvious, but sometimes insurers are looking deeper. While the age and condition of the building are very important, losses to older buildings may require significant upgrades, the result of changes in law or building codes. The basic rule of insurance is to put the insured back to where they were before the loss. If the building did not have a sprinkler system before the fire, but new codes require sprinklers, the building is in fact, improved by the addition of the fire suppression system. Most policies provide a small amount of coverage for changes in ordinances, but older buildings may require significantly more coverage.
Demo and loaner agreements vary from state to state based on local laws. However, the insurer wants to see that the liability for loaners has been effectively transferred to the insurance company insuring the person using the vehicle, should there be an accident. Insurers may also want to see that your customer has specifically agreed to be excluded from your uninsured/underinsured motorist coverage. As for demo agreements, some insurers prefer that the driver is required to take financial responsibility for any deductibles.
Loss control and risk management efforts are important to show that the dealership is a partner in reducing losses. Above, we discussed demonstrating new risk management efforts to reduce losses showing on your loss runs. It is equally as important to demonstrate the steps the dealership has taken that are keeping losses from occurring. Make sure the insurer knows that your good loss experience is no accident.
Any steps the dealership has taken to control losses should be noted. This includes vehicle security, fences, lights, cameras, key control and security services. In many parts of the country disaster preparedness have become of increasing necessity. Detail the dealership’s plans to move vehicles to higher ground to reduce the chance of flood or other weather related damage.
In some cases insurers are becoming more interested in steps the dealership takes to reduce the chance of employee dishonesty. Over the past few years dealerships have suffered some very large claims. Checks and controls the dealership has in place to reduce the risk of employee dishonesty claims should be discussed and is mandatory if your loss runs show a claim in this area.
Employee manuals will be required by anyone quoting Employment Related Practices (EPLI) Coverage. These manuals will address a wide range of employee practices and requirements important to insurers. However, a few items insurers want to see are a solid and unambiguous harassment and discrimination statement and the plan and procedures in place to deal effectively with an alleged discrimination or harassment event. Dispute resolution, disciplinary action, performance appraisal and Americans with Disability Act policies are also important. Red flags compliance procedures should be included.
Recently insurers have expressed an interest in social media policies. Important to note in a social medial policy is to designate who has the authority to represent the dealership on social media and websites and the penalties for other employees who post on behalf of the dealership. Other policies points may include forbidding negative responses to posts by others, ethics, respect, professionalism and integrity, sharing of confidential information both personal and dealership related and posting references to other employees (past and present).