Now I know there are agents and insurance company executives who rolled their eyes and cursed me under their breath after just reading this title. They know where I'm going but I hope they will take the time to read this piece and look at it from the dealer/buyer's point of view.
Insurance companies exist for one reason; to make money and that is all right by me. That's why we all are in business. Insurance companies are no more in the charity business than your dealership. That's OK, too. Most of them are publicly traded or owned by publicly traded parents. Their first loyalty is to their shareholders and that's the way it should be. So what does this mean for the insurance consumer who is told by every agent and every carrier that loyalty to them, in the face of weaker coverages or higher prices, is paramount?
First let's talk about insurance companies who have gotten in and out of this industry. In my almost twenty years of consulting I've seen any number of carriers pack up their bags and leave this industry lock stock and barrel. That's not to say some don't still write a few dealerships, but they don't have programs and are not the market force they once were. Remember Fireman's Fund and Famex? How about American Eagle and Golden Eagle? What about Royal Insurance Company and American Hardware? Now we see another major carrier leaving the garage insurance market only to be replaced (within the broker's program) by an insurer with little dealership experience.
Why does this happen? It's simple. If they were profitable they would keep writing dealers. Remember, that's why they exist and that's OK. Insurers have just as much right to stop writing dealers as Nissan has a right to drop an unprofitable model. But that does not help the "loyal" customer who just got their non-renewal notice.
Now let's talk about those companies that have stayed with dealers through the years. Well, they are not without sin, either. A couple of activities are pretty commonplace. First is not giving their best price. We saw one carrier last week cut their price almost in half at the last minute when faced with stiff competition. Where would that dealer be today if he had been so loyal that he did not feel the need to bid his coverage? Sixty thousand dollars poorer. An insurer rarely, if ever, lowers prices regardless of your losses if they are not forced by good ole competition to do so. But that too is OK as long as everyone knows the game.
I am also reminded of the number of dealers who, much to their surprise, had selected coverages deleted at renewal time. Many of these were loyal customers who did not seek other bids only to find out days or hours before their renewal that they would not have some important coverage. Now of course these dealers had some loss issues, however fair (I mean ethical not legal) notice could have saved the dealer a lot of grief and anger.
Recently, a dealer at a convention where I was speaking, asked me about insurance company loyalty and I said much of what you have now read. He said his experience had been different. Good for him, I thought. He said that because he had been with his carrier a long time they had paid some claims they did not have to pay. I really doubt that is true, though I am sure the dealer believed it. Can you imagine the class action discrimination lawsuit that could arise if someone could prove that long time policyholders got different treatment than newer policyholders? Insurers know this and won't get caught in this trap.
So where does this leave us? You need to make money and so does the insurer. Does loyalty run both ways? Usually not. This is a transaction between two savvy businesses that have the same profit goal. Unfortunately, if one profits more the other profits less. All this means is that buying insurance should be an arm's length business transaction. It needs to be recognized for what it is, a business transaction, and not shrouded in a cloud of loyalty or disloyalty.
Roger Beery is President of Austin Consulting Group, Inc., a firm specializing in dealer insurance consultation.