Pub. 61 2020-2021 Issue 4

20 The number of auto accident claims (that is, the frequency) has risen slightly over the last several decades. For example, national averages indicate auto accidents have risen about 2% per year over the previous five years. Several factors are attributed to this frequency increase: • More cars and trucks are on the road • People average more driving miles • Each year distracted driving – such as eating, talking on cellphones, texting, etc. – causes more and more accidents Dealerships should seriously consider all aspects of their risk exposure, and they should take preventive measures wherever possible to lessen their exposure to driving accidents. I realize this isn’t new information, but I believe it’s an easy can to kick down the road. It takes some thought and possibly making some tough decisions. How have dealership issues evolved? Over the last 30 years, the auto dealer world has changed dramatically, and the value and the loss of dollars in claims have skyrocketed. There are several reasons for that. • Medical technology has advanced. The advancements are a good thing overall because the medical industry now saves more lives from trauma, but their success comes with a price. • The cost of vehicles has also gone up. We drive expensive vehicles with lots of high-end technology. • The world is much more litigious. The claim settlement process for significant losses has become a lot more complex as a result. Once-simple claims have become more difficult as legal externalities have expanded the scope and definition of payments. As dealers sell more cars to more people, year over year, the increased risk to dealers from on-the-road exposure is bigger. There are multiple times in a day where a dealer faces a risk of loss due to an accident: • Technicians take cars for test drives to diagnose problems and verify repairs. • Customers may be provided a loaner vehicle when their car is in for repair. • The sales department takes people on test drives as part of the sales process. • Dealerships often have demo cars on the road: a loan of a vehicle to an employee to run an errand or have a regular parts-and-delivery driver. All these different scenarios create over-the-road touch points where the opportunity for a loss can happen. What’s Sentry Insurance doing to help its customers? Sentry provides a comprehensive commercial package policy specifically tailored to individual auto dealer business operations. Our package policy can cover the building, contents, crime issues (like cyber liability), premise liability, auto liability, E&O, workers’ compensation, employment practices liability and many other business risk exposures. What’s more, we have loss control and loss prevention services to address mitigating those exposures. Even though auto accident frequency has increased, the percentage has been relatively predictable. In contrast, the dollar value of auto claims (the severity) is the real culprit in rising insurance costs. As a result, total auto claim loss costs have been moving considerably higher. Industry experts show loss costs increasing 10% plus over the last few years. Why is the total dollar amount of claims per year rising well above the Consumer Price Index? 1. Today’s cars and trucks are more expensive to repair. For example, in 1990, you could buy a new truck for around $15,000. The average cost for a new pickup truck today is $50,000 2. The cost of medical bills keeps increasing at a much higher rate than the standard rate of inflation. The number of auto losses incurred directly affects a dealer’s commercial insurance cost. And the more losses a The key is to avoid auto accidents and lessen the possibility of having that severe loss. We have loss control suggestions and programs in place to help address these concerns.  ENDORSED PARTNER FOCUS — CONTINUED FROM PAGE 19