Controlling Insurance Costs
Keeping a sharp eye on your business can keep your premiums low.
By Denise L. Rondini, Executive Editor
Insurance premiums represent a significant cost to most dealerships. In fact, according to Zurich Services Corporation, the national average workers’ compensation insurance cost is almost 3 percent of payroll. And workers’ compensation is only one type of insurance coverage dealers must have.
However, there are steps dealers can take to try to control their workers’ compensation risk, according to Jeff Kweder, president, InsureTruckDealers.com, a division of Shepherd Insurance.
“Dealers need to be proactive in terms of their hiring practices as it relates to pre-employment physicals and drug and alcohol testing,” he says.
“Even committing to wellness initiatives at the company is a good idea because not only is it important from an overall health insurance perspective, but it drifts down to the workers’ compensation dollars as well.” And given that worker’s compensation may be 50 percent of a dealer’s overall insurance premium costs, anything a dealer can do to reduce claims helps.
“There is absolutely a cause and effect relationship with the experience model for workers’ compensation,” Kweder says. “The lower your frequency and severity of loss, the lower your premiums become. Conversely, the higher your frequency and severity of loss, the higher your premiums become.”
Dealers who have not already done so, might want to think about adding a risk management coordinator or a safety training coordinator. “I have seen a lot more investment from dealers in safety concerns and safety models lately,” he adds.
According to Kweder, this has really helped the industry overall with the management of premiums.
“We have seen premiums become very, very stable as a result of this industry being a profitable one for the insurance business,” he says. “The insurance companies are very aggressive in their appetite for business because the companies they are insuring are by and large committed to safety, committed to risk management and in many cases have formalized procedures in place and employees whose sole duty is either safety or risk management.”
However, workers’ compensation is not the only risk dealerships have to contend with. Another big area of concern is garage liability insurance.
“From a severity perspective, that is where we traditionally see the largest claims,” Kweder says. “We don’t get to pick and choose how severe the accident is going to be, so as far as protection of the dealership, they need to have quality garage liability and an umbrella insurance policy to protect against a catastrophic event relating to a truck accident.”
Having properly trained technicians is the best way to protect the dealership from these types of losses. Setting up best practices for various types of repairs also is recommended.