Deductible Reimbursement Program for Auto Dealers

By: Bryan Dobson, Executive Director - Business Development

As part of a risk management program, an auto dealer may choose, or be required to take, a significant deductible or retention on a commercial insurance policy. While any commercial insurance policy may be a good candidate for a retention, many auto dealers in today’s environment consider retaining risk on their Open Lot and on their Self-Funded Employee Healthcare risks. In this scenario, auto dealers with an existing service contract reinsurance company could amend the insurance license and utilize their reinsurance company to provide reimbursement to the auto dealership for deductible losses. Such a deductible reimbursement program allows dealers to take control, customize coverage, actively manage risks, and align financial interests. It is a tailored strategy, designed to empower auto dealers with a unique approach to cost control and risk mitigation. Here are several factors a dealer should consider when implementing a deductible reimbursement program. 

1. Cost Control: Managing Insurance Claims Effectively

In the competitive auto dealer industry, a deductible reimbursement program empowers dealers to proactively manage and fund a portion of their losses. This approach allows dealers to strategically influence the financial impact of unexpected events, contributing to a more stable financial outlook. For example, a sudden spike in accident or weather-related claims can be mitigated as dealers, armed with a deductible reimbursement program, exercise more control over claims management, curbing potential financial strain. 

2. Customization of Coverage: Tailoring Policies for Auto Dealership Risks 

Auto dealers face unique risks, making customization of insurance coverage crucial. Establishing a deductible reimbursement program enables dealers to align policies with specific operational needs, ensuring comprehensive coverage that suits their business model. 

3. Risk Management: Fostering a Culture of Safety and Prevention 

For auto dealers, risk management is a compliance requirement and a fundamental aspect of ensuring operational continuity. A deductible reimbursement program encourages active investments in safety and loss control.  Better safety programs allow for fewer incidents, quicker remediation, reduced potential reputational exposure, and more time on the job for employees. 

4. Alignment of Interests: Linking Financial Incentives to Performance 

Creating alignment between financial interests and insurance program performance is crucial for auto dealers. A deductible reimbursement program achieves this by allowing the dealer to bear a portion of the claims costs, instigating a deeper investment in safety measures and loss prevention initiatives. Enhancing dealership security not only ensures the safety of high-value inventory but also becomes a financially incentivized initiative within a deductible reimbursement program, fostering a culture where risk mitigation is ingrained in the culture of the dealership. 

In conclusion, a deductible reimbursement program offers auto dealers not only financial advantages but also a strategic approach to risk management tailored to the unique challenges of the auto dealership space. 

Contact GPW to learn more about setting up a deductible reimbursement program.