Think of this article as both the year in review and a bit of a preview for 1999. The dealership insurance market remained a buyer's market in '98 with prices falling and coverage broadening. Even though a few minor players in the game stopped writing dealers, no one of consequence exited the market. We did, however, see Hartford and Toyota make strong plays to get a foothold. New bidders always serve the dealer community by keeping the competitive nature of insurance bidding alive and well.
On the coverage front, a couple of years ago we saw some carriers take great strides to broaden their property coverage to include many ancillary coverages that were previously purchased separately. These included boiler and machinery as well as "guaranteed replacement cost." This year we saw these broadened property coverages become more of the norm as insurers altered their policies to catch up. Competition is a wonderful thing.
Another shift of importance, mainly to dealers in the hail belt, is the relaxing of deductibles. Many insurers are now dropping deductibles to reasonable levels, but the day of the $5,000 aggregate are still long gone. There still geographic areas with particularly bad hail experience that will see deductibles that will be hard to stomach.
One good news/bad news proposition is that some floor plan carriers are now willing to provide insurance for non-floored inventory. The good news is usually the price. However, the bad news is that there are often coverage restrictions not found in standard policies. Such restrictions may include graduated theft deductibles and drive-away policies that your used car operation is not used to following. The bottom line is, don't just jump at the price, make sure you know all the restrictions and caveats. A negative shift in your loss experience will affect your entire inventory, not just the used cars you added.
Employment Related Practices coverages continue to evolve. A couple of carriers who first issued "claims-made" policies are now shifting to occurrence forms. This is a great improvement for those carriers and is unheard of in other industries. It will be interesting to see if anyone else follows suit. A gray area in some polices has been the treatment of non-employee harassment or discrimination. Most carriers have stepped up to the plate for these claims. However, in 1999 we may see more definition and standardization of this coverage. Remember: definitions can work both ways, so we will just patiently wait.
As I look into my always-cloudy crystal ball, this is what I see for 1999:
· Dealers will remain the beneficiaries of a soft market.
· Prices will continue to come down for those who keep their losses in check and bid their insurance aggressively.
· Some of the new carriers and some of those who were quiet last year will be the price leaders this year.
· Competition will force insurers to broaden coverages.
· It will snow for our July 4th parade here in Breckenridge, Colorado.
Roger Beery is President of Austin Consulting Group, Inc., a firm specializing in dealer insurance consultation. If you have specific questions or require more information about this subject, please check the appropriate box on the reader response form on page 3. rbeery@dealeronline.com