Minimize Open Lot Insurance Cost

It’s no secret that the most troubling insurance coverage for dealerships across the country is their Open Lot or Dealers Blanket coverage. This coverage is typically the largest insurance cost for a dealership and one that can carry very high deductibles, forcing owners to wonder what are they even paying for!

So how can you begin to reduce the insurance cost of your Open Lot coverage? Here are 5 steps that I recommend every dealership does. 

1. Think like an Insurance Company – AHHHHH! What?!?! While that may sounds scary, I do think it is important to start here. Understand that an insurance company is looking to provide insurance coverage at a certain price point that they are able to gain customers yet not lose money from paying out too much in claims. It’s really the same as a dealership. You don’t want to price yourselves out of the market by charging too much for your units, yet there comes a minimum that you need to sell a unit for to keep your doors open. For insurance companies, the magic number is 60%. If an insurance company pays out less than sixty percent of the premium dollars that they receive in claims benefits, they will have a profitable year. If they pay out more than sixty percent of the premium that they collect, they will be losing money. It is obviously a tad more complicated than that, but this rough number will help you as you understand what an insurance company is looking at.

2. Reduce the Risk on Your Physical Lot – Having a lot that is free of risk is not possible. Your business is conducted on your lot and therefore will always present risk to your dealership and your insurance company. That said, there are plenty of ways that you can reduce the risk on the lot including good housekeeping, lighting, locking gates, the arrangement of your inventory, canopies and the lot surface itself. 

3. Prevent Theft on Your Lot – In addition to the physical lot improvements mentioned above, many dealerships will utilize anti-theft devices to lower the chance of theft from their lots. This could be the individual unit GPS tags or catalytic converter anti-theft devices or simply removing commonly stolen parts such as spare tires, LP tanks and TV’s. Think about ways to impede a would-be thief from having a fun time on your lot. 

4. Institute Risk Management Protocols and Policies – Having written protocols/policies on lot security are also very important. These written documents will assist in training new employees and resolving issues that may come up with employees and customers by having a simple process in place. Unfortunately, many dealerships do not have these policies written down. Most dealerships should have the following programs/policies in place:

1. 1. Key Control Policy
   2. Service Drop Policy 
   3. Test Drive Policy
   4. Remote Inventory Security Policy
   5. Severe Weather Policy
   6. Driver Management Policy
   7. Driver Training Program
   8. Driver Testing Policy

5. Work with Your Insurance Agent to get Lower Cost – Once you’ve gained an understanding of how the insurance companies think and have taken steps to prevent or minimize insurance claims on your lot, it is now time to work with your insurance agent to lower the Open Lot insurance cost. Provide examples of your written protocols and send photos or videos of your lot to support the case for lowering the cost for your coverage. The dealerships who get the lowest premiums are the ones taking lot security seriously and trying to minimize potential insurance claims. Help your agent sell your dealership to the insurance company. 

If you are frustrated by the high cost of your Open Lot coverage and or have not had these conversations with your current insurance agent, reach out to a DealeRisk team member today!