Dealer Inventory Insurance Coverage
Dealer Inventory Challenges
Lately, I’ve spent a lot of time talking to dealers about inventory. The topics range from ‘There are no cars available’ to ‘There are plenty of cars out there, but the cost is impacting my business plan’ to ‘Insuring my inventory at the same time I satisfy my insurance budget has become nearly impossible’.
I guess the truth is I try to steer the conversation to that last topic so I can talk about an area where I have some knowledge. The economy changes, business plans change, both vehicles and insurance costs fluctuate with conditions whether it is Cash for Clunkers at the beginning of an economic recession that we faced several years ago or an inability to get microchips from China or gas prices that create more homebodies. I can speak for only one piece of the puzzle: insuring your dealer-owned inventory.
The changing Insurance market
Insurance markets come and go, rates and deductible continue to increase and trying to make it all fit together in a neat package can be challenging without the right pieces. At Mullen Agency, we have one advantage rare among Texas insurance agents, a Lloyds of London Binding Authority, exclusive to our agency for over twenty years. In the last quarter of each year, we meet with our London broker and underwriters to review the expiring contract, to discuss the renewal and what the marketplace looks like for the upcoming year. Each side has their own list of objectives and ideas as to what tweaks in coverage and costs are necessary to allow everyone to come away a winner. These meetings begin with the solid understanding that the goal is a product that works for the Texas Independent Auto Dealer, is priced where the dealer can afford it and allows the both the Lloyds Syndicate and our agency room for profit.
We just signed off on the 2022 renewal agreement and, although the negotiations were tough, the end product is one I am proud of. Let me share a few of the innovative agreements:
- The dealer may choose to purchase insurance only for vehicles included on his floor plan, or vice versa
- The dealer may choose to purchase insurance only for vehicles valued at $50,000 (or any chosen amount) and above.
- The dealer may choose multiple deductibles. For instance, he may choose higher deductibles on higher-valued cars.
- The dealer may choose to purchase wind/hail/flood coverage only on vehicles valued at a chosen stated amount and above.
- The dealer may choose to purchase all coverages or only coverages of his choice. For instance, he may want to exclude flood only or purchase only fire, theft, vandalism and collision or whatever works to mitigate the risks about which he is concerned.
- The dealer may schedule service vehicles on the dealer physical damage policy – often less expensive than scheduling them on his liability contract.
- $150,000 any one vehicle value is within our agency’s authority and we can submit for higher values.
- Nationwide mileage is a built-in factor under our plan. There is no 300 mile radius or trip charges to consider.
- Up to $50,000 in false pretense coverage is available.
Each of the above contract components allow the dealer more room to determine what risks he wants to or does want to take based on his individual operation, insurance philosophy and insurance budget. They can be key to providing a dealer with more control as to where his insurance dollars are spent.
Benefits of Lloyds Inventory Physical Damage Program
Still, my favorite ‘positive’ in our Lloyds physical damage contract is the 80% coinsurance clause. This is not new; it is something we fought for and won several years ago. Although I am not a claims adjuster and have no experience in adjudicating claims, I can share what I have seen in my thirty-plus years of experience.
Most dealer physical damage policies require that the dealer insure 100% of their inventory to prevent any coinsurance penalty on any loss – even one car. When dealers understand this,typically, they are insured to 100% of their investment in inventory. But, for purposes of illustration, let’s say a dealer has $200,000 of insurance on his normally $200,000 or less investment. Then he goes to a Thursday auction or he makes a really good deal with a rental operation upgrading their inventory and his investment is suddenly $250,000 on Saturday. No problem. He plans to call his agent on Monday to increase his coverage.
Unfortunately, life often throws curves and, Saturday night, a $60,000 vehicle is stolen. Assuming a 100% coinsurance clause, the claim will be adjusted as follows: The adjuster will request a copy of the inventory on the date of loss – $250,000. That amount will be compared to the insured amount, $200,000 to determine the coinsurance penalty. $60,000 less $12,000 coinsurance penalty less $1000 deductible equals claim check of $47,000.
Same claim with our 80% coinsurance requirement: $200,000 insured, $250,000 in inventory. $60,000 vehicle stolen. $60,000 less $1000 deductible equals $59,000 claim check.
Provided you are insured to at least 80% of your total inventory investment, there is no coinsurance penalty for any loss less than 100% of your insured value. This protection allows the dealer to have sudden inventory spurts, such as end of school terms, income tax time, before Christmas, etc. without the worry of getting hit with coinsurance penalties. Indeed, it allows the dealer leeway in the amount of coverage purchased without exposing himself to more risk than he wants to take.
Of course, there are reporting forms available for large inventories, but generally speaking, our dealers are comfortable with the blanket coverage, easily understood and easily managed. Increases and decrease in coverage amounts can be done via a phone call, a text or an email.
you Are Safe with Mullen Insurance Agency
Our Lloyds inventory physical damage program is exclusive to our agency and to our clients. I invite you to allow us to provide you with an inventory physical damage quote. Let’s talk about what your needs, your exposures and your insurance philosophy are. Our clients can rest assured, knowing our priority is providing a quality product with a competitive premium as we have done for the last thirty-three years. That goal remains and the chosen replacement products meet our standards and our clients’ needs.
We appreciate your patronage and the opportunity to work with and for the Texas Independent Auto Dealers industry.
Do not hesitate to contact me. I’m eager to receive your feedback, questions and comments. If you have specific subjects or insurance concerns you would like to discuss, please let me know. firstname.lastname@example.org or www.mulleninsurance.com.
If you’d like additional information on insurance for your business or you’d like to request a quote, please visit https://mulleinsurance.com/#Insurance-quote or give us a call at 972-681-6297.
MULLEN INSURANCE AGENCY, INC
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