If you asked 10 people what loyalty means you would probably get 10 different answers. Certainly many couples have a different interpretation of the concept of loyalty, as do business partners. Insurance companies invoke the need to be loyal, maybe more than anyone. Today seems like a good time to talk about insurance companies with new insurers coming on the scene and one major carrier packing up their bags and exiting the auto dealer space.
New car dealers have always had an up and down relationship with the insurance industry. In my 32 years of working with auto dealers and insurers, I have seen auto dealer garage insurance programs come and go. Remember, Toyota Insurance, Chrysler Insurance, Motors Insurance (GMAC) and recently, in much of the country, American Hardware has stopped writing dealerships. After the hailstorms and hurricanes in the mid-2000s we saw insurers limit or stop writing coastal and hail-belt dealers or increase premiums so much those dealers were forced to find other insurers. They expected customer loyalty.
Over the past couple of years, we’ve seen Travelers, Fairmont Specialty, a few regional carriers and a national insurer (that I can’t disclose as of this writing) have all hit the scene, and they too, want your loyalty.
Then there are agents and brokers. Some may be personal friends but their ability to insure your dealership may be limited to only one carrier. In any given year that insurer may or may not be competitive. If that insurer is not competitive, you’ve sent your hard earned profits needlessly to an insurer. This is true with broker/independent agents and direct writing companies. Lately, a number of long time sales representatives and managers of direct writer insurers have left their companies. They have either joined other insurance sales teams or will be part of one of the new programs. They want your loyalty, too. Some even ask you to now be disloyal to the company they told you last year you should be loyal to.
Earlier this year we prepared bid specifications for one of our clients who had not bid their coverage in many years. We received a very favorable bid from the dealer’s “old agent” who had changed companies. The savings were considerable. He had believed the agent in previous years when he had been told year after year, “There is nothing better out there.” When confronted, the agent said, “It was my job to tell you that.” The agent may have been loyal to his employer, but certainly not to his client.
Why all this insurance market upheaval? It’s all about profit and we all should be able to make a profit. The profit motive is important to remember when looking at any firm’s behavior. If an insurance company thinks they will make profits writing dealerships, they write dealerships. If they don’t think they can make a profit they quit or limit their policies or geographic coverage. Insurance companies, like most firms are loyal…to the bottom line. If your account has low losses and is profitable, everybody is happy. If your account suffers a string of losses and becomes unprofitable, you might just find that loyalty is a one-way street, even after many years.
So what does it mean to be loyal or at least what should it mean to be loyal from an insurance perspective? Your dealership works very hard to create customer loyalty, but how do you define that term? Does it mean that you expect a loyal customer to never consider any other vehicle purchase options? Does it mean you expect them to walk into your showroom and pay sticker price? While that kind of blind loyalty would be great, it is not what you really expect. What you expect is the chance to provide great service and a fair price. You want a chance; win or lose, you want a chance.
Why when we discuss loyalty is it only the dealer who is expected to be blindly loyal? Insurers hope you won’t look at all your insurance alternatives each year. Yet they rate and evaluate the profitability of your account each year then decide whether they will offer renewal and at what price. The problem for you is that insurance companies usually don’t reveal their renewal decision (pricing and coverage changes) until the last minute, unless required by law. You then are left with few options unless you have been proactive and have other insurance options available. You have also lost your negotiating power. How do you know if the policy pricing and coverages are competitive unless you see what others are offering? In this changing dealership landscape, knowledge is power and lower expenses are profit.
It makes sense that the lower your losses are, the lower your premium should be. It pays to keep your losses under control so take the steps you should to make your dealership as attractive to the insurance industry.
What kind of loyalty should you expect from an insurance company? First and foremost your insurer should provide you every year with a competitive premium, high quality coverage and superior service. Only if you know what choices you have every year can you be certain you are receiving this kind of loyalty.