Risk Management
A Tighter Insurance Market... What's a Girl to Do?
Roger Beery
As I have mentioned in recent articles, the dealership property and casualty market is tightening. Just last week an executive at a major dealership insurer was telling me how glad he was that the higher rates are sticking. During the same week a dealer told me that since rates were not going down, he did not see any reason to bid his coverages. I was dumbfounded by this comment. "How about to keep them from rising?" I said. Every dollar your insurance rises more than it must, it's another dollar of lost profit. We have talked to many Toyota dealers who are being forced to find new insurance since Toyota Motor Insurance Services stopped writing business. Many, as you would expect, are bidding their coverage. However, you would be surprised at the number of dealers just renewing with their previous (before TMIS) insurer. On a similar note, I am hearing of many instances where dealers' insurers are saying "You don't need to bid, we'll be about where we were last year." Bear in mind that usually the insurer's and dealer's definition of "about the same" is quite different.
So this brings us to the question, "What's a girl to do when facing higher insurance rates?" The answer is obvious: bid your coverage. There are, however, a few different strategies you should employ in this tighter market.
More Time
As the market tightens, more dealers are bidding their coverage. This is compounded by the fact that a few insurers have stopped writing dealers and all those dealers are looking for new insurers. One way to address this problem is to give the insurers more time. One way insurers reduce the number of submissions they will quote is to put arbitrary time limits on their quotes. Such a company may not quote less than 45 or 60 days. This is an easy problem to address: just get your specifications out in the marketplace earlier. A 60- to-90 day time frame will serve you well.
Review Your Loss Runs
The better the information you provide, the better chance you have of a positive outcome. We could spend pages going over everything that should be included, but for the sake of expediency, I'll just talk about loss runs. Loss runs must be included but you need to check them over for accuracy. There are often claims left open after they are closed, reserves that are too high for the claim, stolen cars still on the loss run after they have been recovered. In addition, you should editorialize on big claims and rashes of claims. Be sure that if you have taken steps to reduce your claims, the bidders know this.
Play Better Politics
Since to some extent this has become a seller's market, the dealer may need to "jazz up" the bidders. Don't expect as many possible insurers to be knocking down your doors as they have in the past. You may need to be proactive and give a few of your past bidders a call. After they respond, spend a little time with them and help them understand that if they keep their pencil sharp you will do your part by keeping losses down. If there are bidders who feel they don't have a chance at getting your business, let them know if your decision parameters have changed. If bidders tell you they are not competitive, ask for their numbers. In this market you never know what you'll get and the bidder's perception of non-competitive may turn out to be a good deal.
Negotiate
Negotiation is the name of the game. Buying insurance is a lot like buying a car. If you settle for the sticker price you're losing out. Insurers still will negotiate and they are much more inclined to do so if their competitor is in your office. The best way to keep an insurer's pencil sharp is to make sure he has competition. This is not a market where asking for a reduction does much good unless the insurer knows you know you have other options.
Don't roll over just because the market is tightening and your premiums may go up. Be proactive and bid aggressively. You never know-you might just get a premium reduction after all. In any case, you will keep a few more of your hard-earned dollars on your bottom line.
Roger Beery is president of Austin Consulting Group Inc., a firm specializing in dealer insurance consultation. rbeery@dealeronline.com
