Exploring Dealership Insurance Options
Dealership insurance should provide the most comprehensive coverage at the lowest cost.
We achieve this by controlling claims and utilizing options. But, without the ability to predict the frequency and severity of claims and having procedures in place to control losses, choosing a loss sensitive plan is a lot like going from table to table in Las Vegas. You are relying purely on luck.
This is not how you want to approach insurance.
However, if you have all of the necessary Risk Management components in place: Historical Claims Analysis; Risk Management Committee; RFP Specifications; you can begin taking control of your insurance premiums by exploring options.
First, look at Deductibles.
Here is where having a historical understanding of claims becomes critical. Explore the areas where frequency is low and let those be the first deductibles to increase. If property losses are infrequent, move that deductible from $ 1K to $ 10K or even as high as $ 25K. For coastal states, keep the Wind Deductibles at 3% or 5% and raise only the AOP deductibles (Fire, Theft, Vandalism, etc.). Also, look at Crime and Pollution for other areas where frequency is low and raising deductibles will not have a financial impact every year.
Understand that the cost of each coverage is weighted differently , so raising the deductibles for the separate lines will vary in the levels of savings. But, we are looking at the big picture and every area of savings will reduce the overall premium.
As you move through the process, you will find the major impact on premium is in the Liability area. Taking on more risk (through deductibles) for Bodily Injury and Property Damage claims will substantially lower premiums. This is where accidents occur most often. But, if you understand your claims…and can control the frequency, then this is the area to focus on.
Next, explore retention options.
Many carriers provide retention programs to reduce premiums. A retention is a level of self-insurance (risk retention) that the Insured assumes after the maintenance deductibles are applied. This can be as low as $ 150K or as high as $ 250K. Some can go even higher. After the deductibles are applied, the Insurer pays the claims and bills the Dealer until they reach the retention level. After the retention is satisfied, all claims are fully insured (subject to the deductibles).
Carriers will provide premium relief for these scenarios…but, don’t expect dollar for dollar. The ratios range from 90% all the way down to 50%. You take $ 200K in retention and the Insurer will reduce the premium from $ 180K to $ 100K.
Finally, ask about Large Deductible plans. Large Deductible programs provide a Deductible for any one claim (specific) and a stop for all claims in a given year (aggregate). So, a Dealer can choose a specific of $ 150K or higher for any one claim (assuming all of the risk up to that amount) and a ‘’stop loss’’ or aggregate that will exceed the normal policy premium by 25% – 50%. The key is to ensure you have a specific that fits your needs, an aggregate that maximizes the potential premium, and a premium savings that is relative to the level of risk you are assuming.
Remember, with any cost savings approach…the so called Loss Sensitive plans…there is always a risk/reward factor. You assume a greater portion of the risk in return for premium savings.
It is important to explore all available options to control and/or reduce premiums.
Watch for our next info blast…Discover Captives!