Create a Superior Dealership Insurance Program

1. Create a Superior Dealership Insurance Program Roger L. Beery, II, President Austin Consulting Group Steven P. Gibson, President Dealer Risk Services

2. Leave this slide blank for video introduction to be added by NADA

3. Create a Superior Dealership Insurance Program Roger L. Beery, II, President Austin Consulting Group Steven P. Gibson, President Dealer Risk Services

4. The Improving Dealership Insurance Marketplace • The insurance market is always changing. Direct writers are using unrelated carriers for EPLI, DPD, Pollution, and Property. • There is a vigorous market with a couple of new carriers on the horizon • Carriers are still trying to push premiums up, increase deductibles and limit coverage. However, increases are less when insurers feel competition. • A majority of insurance executives think the market will begin to soften over the next 12 -24 months

5. Identify the Insurance Market for Your Dealership • Dealership Insurers are a unique combination of • Direct Writers (Zurich, Sentry, Federated, etc) • Agency/Broker Companies (Travelers, Chubb, etc) • Regional Carriers • Some insurers prefer larger dealership groups while others prefer mid-size and smaller dealerships • Insurers will offer different programs to meet different needs • First dollar or low deductibles • Larger deductibles • Retention programs

6. The Loss and Premium Relationship • Loss experience drives premiums – What do insurers look for? • Historical loss trends • Loss Frequency (Frequency leads to severity) • Loss Severity • Develop Management Response to Losses • Underwriters view loss frequency as a sign of poormanagement • Effective management response to large or repeat claims demonstrates a desire to control losses

7. Understand Your Claims • Map your claims by line and locations being aware of trends • Auto accidents • Slip and falls • Auto thefts • F&I related claims and allegations • Similar types of worker’s compensation claims • Repeat claimants • Fully document all claims in excess of $10,000 • Develop information gathering procedures for claims • Incident Reports • Witness Statements and Pictures

8. Create a Claims Strategy • Quarterly claims reviews • Review loss runs • Consult with Carrier Claims Managers • Review settlement options • Discuss significant reserve changes • Consult with claims Counsel • Initiate risk management strategies for claims control • Safety committees • Safety incentives • Review claim trends • Look for the how’s and why’s of each claim

9. Large Deductible Dilemma • Insurance companies are cash machines. They don’t like to pay you for the risk you take. • What is your risk tolerance if losses turn bad? • Are you reviewing your loss trending when choosing deductibles? • The most economical deductibles in the past may not be the most economical at renewal.

10. Devils in Coverage Details • The basic policy frameworks are similar. The differences are buried deep in complex policy language. • Are repair and replacement percentages the same for wind & hail as they are for other damage? • Is inventory flood excluded? • Is E&O limited to “Defense and Settlement”? • Umbrella Occurrence or Aggregate?

11. Devils in Coverage Details • Employment Practices Liability (EPLI) • Occurrence vs. Claims Made Policies • Lawsuits from non-employees • Wage and Hour claims • Defense inside or outside limit

12. The Truth About Insurance Premiums • Everything is Negotiable • Alternative bids put you in the power position • Without competition insurers will push premiums up • Negotiate the big numbers – not parts • Loss experience drives premiums • Last year’s best deal may not be the best at renewal

13. Six Keys to Effective Bidding • Bid annually to get the right coverage at the best price • Cast a wide net • Direct writers • Agency/broker companies • Specialty insurers • Create your own bid specs so everyone is bidding on the same values

14. Six Keys to Effective Bidding • Get outside the box • Stand-alone coverages • Specialty coverage • Risk financing (deductibles, retentions, etc) • Negotiate…Negotiate…Negotiate • Trust but Verify • Reporting forms • Rating formulas • Unexpected exclusions and higher deductibles

15. Create an Effective Bid Process • Begin your bid process 90 days in advance • Be proactive. If you wait…it’s too late • Communicate with insurers and agents • Meet with Company Underwriters and Claims Managers • Consider your relationship with the insurer a “marriage with an annual trip to the alter” • Review loss runs for accuracy. Explain all losses over $10,000 including the risk management response

16. Create an Effective Bid Process • Assign insurance markets to agents when required • Do not allow one agent to control too much of the process • Be open to deductible and cost reducing options • Loss control representatives can be a key to success

17. Create an Effective Bid Process • Prepare for last minute bids • Allow sales reps to make their presentations • Create an internal spreadsheet for bid analysis (see handout) • Negotiate premiums, deductibles, coverage and limits

18. Professional Bid Specifications • Create a framework for desired coverage, limits and deductibles • Review existing policies as a guide post • Using old policies as bid spec may replicate past mistakes • Provide accurate, concise and consistent underwriting data • Employee lists • Auto inventory values • Building, Contents and Business Interruption values • Contractors who will re-build facility in the event of Loss • CPA’s to assist in determination of Business Interruption needs • See handout for more detail • Manufacturer operating statements are often mandatory • Audited financials may be required for loss sensitive plans

19. Professional Bid Specifications • Include currently valued loss runs (within 90 days of expiration) with large loss explanations • Agents must agree to use your underwriting data or point out all deviations • Time frame expectations should be made clear • State your service expectations, especially with multiple carriers

20. Find Your Risk Tolerance Level • Analyze Historical Claims Trends and apply against Deductible Credits provided by Insurers. • Initiate aggressive Loss Control procedures. • Give Management ‘’skin in the game’’ by making them responsible for Claims Deductibles. • Look for creative ways to fund Property and Liability Deductibles.

21. Umbrella Coverage • Evaluate what you can lose in the event of a really bad claim. • Look for Per Occurrence Limits that are adequate. • Price Umbrella Limits with various carriers…price goes down as coverage layers increase. • Examine what coverages do not extend into the Umbrella and seek excess limits in those areas.

22. Insurance Outside the Box • The Insurance Marketplace is very broad. Just because your agent doesn’t offer a coverage does not mean it does not exist…ask • Unique coverage worth considering • Kidnap and Ransom • Difference in Conditions • Deductible buy-down for weather deductibles • Directors and Officers • Stand alone professional errors and omissions

23. Insurance Outside the Box • Large deductible and retro plans • Captives and Alternative Risk • Group Captives • Cell captives • Single Parent • 831b Small captives to enhance your existing program

24. Questions?