Last week I saw an article in Business Insurance Magazine predicting increasing insurance premiums for 2011. While the article did not specifically mention auto dealership garage insurance, there is reason for concern. The article went on to blame this uptick in the insurance cycle to increasing losses compounded by investment losses. When insurance companies lose money, they expect you to make up for their losses with higher premiums.
Whether garage and other dealership insurance premiums are going up, going down or are stagnant, it pays to use sound dealership risk management and insurance bidding practices to make certain you have the right coverage at the lowest available price in the dealership insurance marketplace. Here are some tips to help you maximize your dealership insurance dollars.
1. Know what is happening in the dealership insurance marketplace.
As of this writing, we at Austin Consulting Group would describe the dealership marketplace as vigorous and firming. By vigorous, we mean there are still a good number of insurance companies wanting to provide insurance to auto dealerships. In fact, there are a few new insurance carriers and programs that have come on line just this year. In some parts of the country we still see regional insurance companies soliciting dealers.
Here’s the downside, we have recently seen some insurers testing premium increases at renewal. If the dealer has been proactive and gotten other quotes, two things happen. First, insurance companies are more reserved with possible premium increases because they know you may have a better option waiting in the wings. Second, if your renewal quote does go up or a more aggressive carrier offers a better price for the right coverage, you are in a position to take advantage of the opportunity and lower this big dealership expense.
2. Is just getting a couple of quotes enough to guarantee success?
In a word, no. Just getting a couple of quotes does not guarantee you’ll get to the right insurance company who will be the most eager to make your dealership the best insurance deal. Plus, if you only go to a few carriers, there is always a chance you will have a no-show or two, leaving you with few, if any alternatives. At ACG, the bid specifications we prepare for our dealer clients normally go to six to10 prospective bidders.
3. Don’t assume that all your bidders are using the same rating information.
Much of your dealership’s premium is either adjusted at audit or by reporting form so you pay for your actual exposure. So if one bidder bases his quote on 90 employees and another bases his on 110, how will you know? While the quote based on 90 employees may look less expensive, after audit or monthly reports, it may be quite a bit more. It seems that renewal carriers are the worst culprits when it comes to ignoring the rating information you give them. They all seem to have their own formulas such as using averages from the last year whether or not they are relevant to your year to come. It is important to ask what rating bases were used and require the insurers to provide you with reporting forms or the rates they will use to adjust or audit your premiums.
4. Are all dealership insurance programs pretty much the same?
On the surface it would seem that way. Most insurance programs do offer similar coverage sections with much of the same coverage. There can, however, be big differences in the fine print. I have discussed many of these points in previous articles. Be concerned when agents offer advice about what may or may not be covered in a competing bid. Often this information is inaccurate so ask your questions of the agent who supplied your bid and don’t rely on “the other guy.”
5. Should I give a hard deadline for the bids, so I don’t get stuck at the last minute?
It’s tempting, but you might be cutting off your nose to spite your face. The insurance industry is geared to provide quotes within two to three weeks of expiration and often that can drag on to two to three days or is some cases two to three hours. Putting a hard deadline three to four weeks out can cause a number of problems. First, you may be excluding a very good bid that could save your dealership significant premium dollars. Second, if you extend the deadline for one bidder, the others who worked hard to meet your deadline may feel like your bid process is rigged against them and in favor of that bidder. The chance of those agents aggressively coming back next year is reduced. Third, you may lose some negotiating power. It can be a daunting task to decipher a stack of insurance bid binders when you feel like you are under the gun, but sometimes it is the best thing to do. Sure, you are under the gun but the agent and insurance company is, too. You can often effectively use your expiration date as tool to help you drive home the best deal possible.
Bidding your dealership’s insurance can be a headache and everyone hates to do it. However, an effective insurance bid process is the only way to make certain you are not overpaying and sending your hard earned profits needlessly to the insurance company.