A hard market and weather damage shouldn’t slow down your dealership

Automotive dealerships face some of the most complex risks in today’s insurance marketplace. From inventory shortages to shifting weather patterns, dealers are managing constant change. Unfortunately, the insurance marketplace has been slow to adapt, leaving dealers asking for creative solutions.

What does the near future of the auto insurance market hold? How can Marsh McLennan Agency (MMA) help you get the coverage for your dealership that you need?

Read on to find out.

Carriers and capacity

From 2016 to 2021, there were significant industrywide losses, causing many insurers to exit the dealer insurance marketplace. This lack of market competition has led to rate increases and a reduction in available capacity as the remaining carriers attempt to make up for past losses and write sustainable, profitable business. Dealers have been left with a tough choice: pay more for coverage or take on an uncomfortable level of risk to manage costs.

While new carriers aren’t entering the market, some are once again offering coverage for dealers. Carriers who had stopped writing coverage for dealers are coming back with an aggressive stance. More options means increased market competition that an experienced broker can leverage to improve the cost and terms for desirable risks.  

Dealer’s open lot coverage trends

Despite the shifts in available carriers, most coverages have remained stable—though placing cyber and excess liability coverages for any industry can sometimes be a challenge. Dealer’s open lot coverage (i.e., coverage that protects the on-lot inventory of a dealer from various forms of physical damage) has quickly become one of the most volatile coverages placed in the market today. While the rates appear to fluctuate unpredictably, digging into the data leads us to a more nuanced conclusion.

Overall, we can see a trend of stabilization starting in Q4 of 2020. The reported variations become less volatile and the overall rate increases begin to slow moving into 2022.

By digging a bit deeper, we can also determine that policy effective dates make a significant impact on program rates. Q2 is historically favorable while Q1 and Q3 bring a double-digit increase. We can directly relate this increase to claims paid out by insurers following “hail season,” or March through September in many regions.

Historically, most hail losses have occurred in “hail alley”—a group of states in the Midwest deemed at higher risk for damaging hailstorms. For the past several years, hailstorms have been worsening outside of this region, bringing more hailstorms to Eastern states with more populous areas. As a result, despite a surprising year-over-year decrease in the number of hailstorms, the number of properties affected increased. According to a report from Verisk, nearly 6.8 million properties were affected by a damaging hailstorm in 2021, which is an almost 10% increase over 6.2 million in 2020.

This increase in weather related loss and the total loss potential of open lot claims has further reduced available coverage and the number of carriers willing to offer the coverage in high-hazard hail states.

How MMA can help

When facing a hard market, adaptability is one of the key attributes any dealer should strive for themselves and seek out in an insurance partner. Many dealerships are adapting quickly to these industry changes by adjusting their sales process due to inventory shortages, or even putting up hail nets to reduce losses from weather. 

At MMA, we understand the need for a better solution. We work with our clients to design customized insurance programs capable of proactively evolving alongside and independently of the traditional insurance market. We offer our clients alternative options, focused on providing flexible reporting and terms.

Don’t let a hard market or a devastating hailstorm leave you out in the cold. Visit MarshMMA.com to learn more and find the contact information for your local dealer specialist.