The COVID-19 pandemic, the global semiconductor chip crunch, and the ongoing supply chain crisis have created a perfect storm for Canadian dealerships. Across the country, new and used-car lots are sparsely populated, and a complete imbalance in supply and demand is putting immense pressure on dealerships.
The current economic climate has provided one silver lining on this largely pandemic-triggered cloud. Dealerships are able to secure the full manufacturer’s suggested retail price (MSRP) for new vehicles, and they’re selling used cars for record prices. However, with few vehicles on their lots, this is having relatively little impact on the broader market challenges.
COVID and the supply chain crisis are not the only risks dealerships face. This has long been a challenging class of business for insurers to underwrite profitably, according to John Hawkrigg, chairman - Toronto, Gallagher Canada.
“A lot of the challenges revolve around climate and severe weather exposures like hail, wildfires, and flooding,” he said. “Theft and carjacking are also big exposures, as well as false pretence and conversion, when somebody falsely claims ownership of a vehicle and then trades it in.
“For dealerships, it’s also important to carry high liability limits, especially when they’re leasing vehicles or managing daily rentals, because if there’s a catastrophic claim, often the owner of the vehicle or asset (in this case, the dealer) gets named in the suit.”
Faced with such challenges, dealerships are often very advanced and professional in their insurance and risk management decision-making, according to Hawkrigg, who said that insurance is probably in the top five expenses of operating a dealership.
“There are a lot of dealership groups now; it’s very rare that you get a single manufacturer dealer with one location,” said Hawkrigg. “Often, the insurance buyer at these dealership groups is their chief finance officer (CFO) and they have either a CPA degree and/or an MBA, so they’re very professional and sophisticated.
“As a broker, when we’re identifying a prospective client, we want them to be best-in-class when it comes to risk management. Because this is such a tough class of business, we want to do the best for our clients and for the [very few] specialty insurers who are backing dealership insurance programs.”
There are four competitive dealership insurance programs in Canada – one of which is DealerSure Insurance, originally a Gallagher-only product, which is now reporting directly into Excess Underwriting, a Markham, Ontario-based property & casualty insurance MGA.
DealerSure is a product built to address the risks Canadian dealerships face, both on premise and on the road. Catering to automobile, truck, motorhome & trailer, and motorcycle & powersport dealerships, DealerSure solutions include a broad range of insurance packages such as custom protection, road hazards, daily rental, legal expense, terrorism, and personal insurance.
Hawkrigg has been heavily involved with the DealerSure program within Gallagher. He told Insurance Business he is “very excited” about its integration into Excess Insurance, which is a Gallagher-owned MGA. “This is an opportunity to take a great platform and grow it,” he said. “The success of any program lies in strong and profitable growth – and I’m confident the team at Excess Insurance will make that happen.
“One big benefit of having Excess Underwriting take on the DealerSure program is the strength of their expertise in underwriting specialty programs at a very profitable level. It will also allow more brokers access to DealerSure’s suite of products. As an MGA, DealerSure will be able to provide sub-broking agreements to brokers in geographic areas where Gallagher doesn’t necessarily have representation.”
Excess Underwriting president George Longo also shared his excitement about bringing DealerSure into the MGA. He said: “We’re very excited about bringing this product on-board. It’s very unique to us, and it’s quite unique as an MGA because many choose not to participate in the automotive sector. We can take this product and offer it to the thousands of brokers we deal with across Canada.
“By aligning with the MGA strategy, we can create new opportunities for our broker partners when it comes to servicing this wide range of businesses, including multinational and non-franchised dealerships. It continues to be a priority for us to support our broker networks by expanding our product and solution offerings, and DealerSure will play an important role in ensuring Canadian motor dealerships risks are covered.”
