Inventory Coverage for Dealerships
In the dealership arena, inventory is one of your most precious assets. It is the vehicle (no pun intended) that entices customers to your dealership. The lure of that specific car and the advertisements surrounding the merits of your dealership are what stimulate sales. Therefore, without an inventory of cars and trucks to sell, your revenue stream becomes hindered. Thus, securing your ‘’goods’’ with inventory coverage is vital.
Inventory Coverage Challenges
While insuring inventory appears simple, it can be tricky. The dealership insurance industry often places several obstacles on seemingly straightforward claims payment. Consider the following challenges when shopping for Dealers Open Lot Insurance:
Size of the Market
The Dealers Open Lot market is limited, consisting of four to five insurers (outside of floorplan carriers) that are considered potential players. If your dealership is in a CAT-prone area such as South Florida or the hail-prone regions of Texas and Colorado, the market might be even smaller.
Increasing Deductibles and Decreasing Availability of Weather Aggregates
With any restricted market, the insurance carriers have the leverage. Expect deductibles to increase and the availability of weather aggregates to decrease, particularly in CAT areas.
Also, look carefully at how the insurance carrier will pay claims. In today’s market, the use of PDR for minor damage and restrictive Hail Matrix-driven settlements is more often the norm. It is a good area for discussion before inking the renewal.
Look for lower per vehicle limits and False Pretense coverage written on a per unit and annual/policy basis. Most importantly, look for policy verbiage that may restrict coverage to Scheduled Lots. We all know General Managers and Sales Managers tend to lease a storage lot for overflow without notifying the Insurance Agent or Insurance Carrier. Make sure all your lots are scheduled on the policy before a claim occurs.
Risk Management Protocols
With any insurance program, there is a cost at the time of loss. With inventory, this may come with a deductible and the repair percentages attached to the policy. Hence, the loss of the sellable unit always carries a price. It behooves you to ensure that these occurrences are as infrequent as possible. Noting that a total loss is frustrating and has the highest economic impact, consider the following risk management protocols to protect inventory:
Look for areas to tighten key control and lot security. For example. consider key machines and utilize technology for geo-fencing and inventory tracking. However, understand that even the best of systems is of little use unless the proper procedures are in place. It is critical to assign the duties of monitoring these systems to a valued employee or two.
False Pretense Claims
Given the tools available to criminals, ensuring a customer is who they claim to be can present a challenge. The key is to slow down and take the extra steps in the verification process. There is some technology available to assist in this area, providing you the ability to dig deeper into the verification process and request information beyond what the potential perpetrator has gathered.
A Proactive Approach
We all understand that claims happen. However, the more proactive dealers are about protecting their inventory, the more they can boost profits consumed by lost sales, deductibles, and time dealing with adjusters and managing claims.
Understanding the coverage nuances will put you in the driver’s seat with your dealership insurance program for years to come. Now is the time to review inventory coverage and act!