By Steven P. Gibson, Dealer Risk Services
Dealership acquisitions present numerous challenges. One issue often overlooked is the way growth affects the Dealership’s insurance program. Not adjusting your dealership policy as you grow exposes you to increased risk and potential lost income.
It is ironic how often we see Dealer Groups who are solidly in a growth mode maintain their “small store’’ insurance programs. This mindset can jeopardize the Dealership’s financial stability by ignoring the increased risk and the enhanced coverage options available.
As well, using standard or off-the-shelf insurance programs actually increases the premium and denies the entity the ability to develop and utilize sophisticated Risk Management processes which can dramatically improve the Dealership’s bottom line.
Just as a newly-acquired franchise or group increases Revenues and Personnel, the insurance program of the acquiring entity should grow as well. Dealers understand the need for more advanced IT systems and management teams to handle growth — moving to a more sophisticated insurance program makes sense as well.
Within the Dealership insurance arena, there are ‘’levels’’ of available coverage programs. For the single point and smaller dealer groups with employee counts under 250, the industry service normally comes from a local agent or regional representative of the Direct Writers. These programs are typically serviced by regional offices that handle both underwriting and claims. These offices also issue endorsements and certificates and provide a level of service on an ‘’as needed’’ basis.
From an underwriting perspective, they offer standard deductibles and boilerplate coverage that often require supplemental placements to conform to the Dealership’s needs.
When the employee size moves above 250, the options begin to increase. For groups this size, various carriers in the insurance industry provide service through National Accounts Divisions. These programs are normally initiated by a representative that is domiciled in a strategic region and who services multiple states. But, it is the flexibility of the program that is unique.
Dealerships with employee size over 500 move completely into the National Accounts arena.
National Accounts coverage platforms offer Loss Sensitive options not available in the regional programs. These include: Choice of Counsel; Large Deductible and/or Retention options; specific pre-determined loss control; and the ability to negotiate enhanced coverage. This type of program affords larger Dealerships the ability to not only craft coverage to fit their growing needs, but also participate in the losses; realizing a reduced premium for solid performance.
As groups exceed the 1000 employee level, the options are even greater. Dealerships of this size can participate in Captive Insurance programs, either as a member of a Group Captive or in the formation of their own Single Parent Captive. Again, the benefits are found in the extraordinary flexibility of these programs.
Captives provide all the advantages of the National Accounts programs with expanded control over underwriting and claims. Essentially, Captive programs afford larger Dealers the opportunity to participate heavily in policy verbiage and underwriting profits as well as the investment income gained on the premium. Captive members also exercise the ultimate level of control over the choice of vendors for legal, accounting, investment portfolios, and claims handling.
Remember, as your Dealership grows, so should your insurance program.
Steven P. Gibson is the President of Dealer Risk Services, Inc., a Florida-based firm that provides insurance expertise to the Automotive Industry. He can be reached atsgibson@dealerriskservices.com and 321-733-6253.
