Automobile Dealer Magazine

Mega-Dealer Insurance: Consistency is the Key by

Roger L. Beery, II

The mega-dealer faces many of the same insurance struggles and challenges as any other dealer; however, with a whole bunch of stores come a whole bunch of new issues.

From an insurance point of view, we see multiple dealership groups managed in two ways. First, as a single organization with one insurance program and one objective in mind. Secondly, as a group of standalone stores that all make independent buying decisions. In most cases I recommend the first model as the proper way to approach insurance buying. Bidding a big group gets more attention than a series of single points. The second model can sometimes be useful when the stores have large geographical distance between them. Some insurers are just more aggressive in some parts of the country than they are in others.

Regardless of the model you choose, it is very important to keep the coverages consistent between stores. Many reasons are obvious, such as ease in management and claims handling. However, another reason to consider is management compensation. Many managers are compensated based on the profitability of their store; therefore, it is important that they be treated the same should a large loss occur. As an example, we can look at the dealership who loses their shop to a fire. If one store carries business interruption coverage and another does not, one manager may get his bonus and the other may not.

A less obvious problem centers around the fact all coverages are not created equally. If you recall my two articles on "Employment-Related Practices" coverages, you know how different two coverages with the same name can be. If two stores have similar claims you would not want to see one covered and one excluded.

There are other areas where consistency problems can arise which deserve more attention. Here are a few to think about: review your physical damage deductibles, the amount paid to you for repair work, business interruption on all stores and the limits on dealer specialty coverages (i.e., errors and omissions, legal defense costs). Consistency pays at the time of a loss.

Roger Beery is president of Austin Consulting Group, Inc., in Austin, TX, a firm specializing in dealer insurance consultation.