1. Benefit from Being an Intelligent Insurance Buyer
National Automobile Dealers Association
August 23, 2012

2. Presenters Today Roger L. Beery, II President Austin Consulting Group
Steven P. Gibson
President
Dealer Risk Services
Jeff Mount
EVP-Insurance Operations
Federated Insurance

3. Dealership Insurance Market is in Flux
Premiums are going up for the first time in 10 years.
Insurance market moves due to competition, reinsurance costs, loss trends, weather related losses, etc.
Some carriers like Fairmont Specialty are leaving the market while others like Liberty Mutual are entering. Harco got out and is now back in.

4. Dealership Insurance Market is in Flux
Some insurers are pushing for higher deductibles while others are limiting coverage.
Direct writers are using unrelated carriers for EPLI, DPD, Pollution, and Property.

5. Understanding What Insurers See in Your Loss Runs
Frequency vs. Severity
Which is more important? Frequency
Why? Frequency trends lead to severity. Frequency can be a sign of lax or poor management.

6. Understanding What Insurers See in Your Loss Runs
Map out your Loss Experience by Line
Look for trends in both types of claims and location.
Document all claims over $10K with Management Response to control future claims.

7. Risk Management It’s not a once-a-year event Strategies: Assume
Prevention
Reduce
Transfer

8. Dealer Best Practices #1 Problem – Who’s got the Keys?
Motor Vehicle Records
Loaners
Test Drives
Demos
Inventory Control
Employment Practices

9. Case Study Dealer ABC Dealer XYZ Ordering MVRs All the time Most hires
D&A Testing Yes No
Demos No employees All sales people
Harassment/
Discrimination Policy Yes No
Written Performance
Review Yes No

10. No Two Insurance Programs are Exactly the Same
EPLI – Claims made vs. Occurrence
Dealer’s Physical Damage
Repair & Replacement Percentages
Does higher % apply to weather?
Paintless Dent Removal
Umbrella – Occurrence vs. Aggregate

11. Thinking Outside the Box
Just because your Insurer/Agent doesn’t offer a coverage, does not mean it is not available in the Marketplace.

12. Thinking Outside the Box
Insurance Industry has a very broad scope of products.
Deductible and Aggregate Buy Back Programs
Property/Windstorm Deductibles
DIC Coverage for Business Interruption from Flood
Stand Alone Errors and Omissions Coverage
Customized policy verbiage
Security and Privacy Protection

13. Thinking Outside the Box
Captives and Alternative Risk Programs
Group Captives
Cell Captives
Single Parent Captives
Large Deductible and Retro Plans

14. How Much Risk to Assume? Understand your own tolerance
Are higher deductibles the best value?
Evaluating loss trends and loss control

15. Effective Insurance Buying
Annual Bidding
(Roger) Because Insurers present their renewals with little time to act, dealers have no choice but to be proactive and seek alternatives. Competition is the only way to hold the line on prices.
(Nate/Jeff)
(Steve) I feel it is important to develop relationships…and the relationship between an Insured and Insurer/Carrier is like a marriage with an “annual” trip to the alter.

16. Keys to Effective Bid Specifications
Do not use your old policy as a bid specification.
Develop a framework (coverage, limits, deductibles) of current coverage.
Offer an organized specification with consistent data (refer to applications for required data).

17. Keys to Effective Bid Specifications
Loss runs should be valued no longer than 90 days before expiration.
Explain any large losses or frequency issues and new loss control measures
Discuss coverage and deductible options you would like to see in advance.

18. Keys to an Effective Bid Process
Start at least 60 – 75 days before expiration – 90 optimal.
Underwriting information should be complete and consistent
Building Valuations should be current
Financial Data should be current and accurate
Request options and coverage breakdown by line
Deductible Options
Cost Reducing Options
Demo Reductions

19. Keys to an Effective Bid Process
Provide consistent information to all bidders and make them agree to use your data in their premium calculations or note any deviations.
Approach both direct writers and agents/brokers to see the whole market.
Assign markets where necessary.
Analyze bids for both cost and coverage.
All things are negotiable-Premiums, Deductibles and Coverage issues.

20. Summary
The dealership market is always in flux. The prudent dealer is proactive.
Be aware of your losses. Keep track of changes to old losses. Explain large losses and new loss control measures.
Use “best practices” to have a long-term positive effect on losses.
Most insurers have coverages with the same title. That doesn’t mean the coverage offered is the same.

21. Summary
Think outside the box for unique coverages that meet your special needs.
Deductibles – Look carefully at your loss experience and consider the economics of the risk you are assuming.
Develop your own bid specifications for best results.
Use the Keys presented for an effective bid process.

22. Questions?

23. Thank You!