In addition to risks common to every industry, such as theft and natural disasters, motor vehicle dealers face unique risks to their industry. Here we look at the common exposures motor traders can face, and the steps which can be taken to reduce these risks.
While owning and operating a motor vehicle dealership can be a very rewarding experience, owners face a number of exposures that they will need to contend with on a daily basis in order to successfully run their business.
Property Exposures
Significant property exposures are present in motor vehicle dealerships due to the presence of toxic or flammable chemicals and welding materials used for repairs, as well as the constant moving of vehicles around the property.
Vehicles, tools and equipment, office supplies and the building itself are all at risk of being damaged during day-to-day operations.
Professional Indemnity
Motor vehicle dealerships are at risk from professional indemnity exposures, which can come from customers who feel that there was a problem with a purchase, vehicle repair or other service from the dealership.
Customers may claim that they were misled by an advertisement or lied to about the condition of a purchased vehicle, or that an employee made an error on the loan or lease papers. Additionally, customers may allege that the milometer was rolled back for a sale, or forward after maintenance.
Crime
Crime can be of particular concern to motor vehicle dealers because they often keep many for-sale vehicles sitting on an outdoor storage lot, which may be valuable on their own or contain parts that are of significant value to thieves.
Dealers are also at risk of computer fraud, forgery or alteration, cash theft and employee dishonesty. In some cases, a dealer’s location, and the type of vehicles they sell can increase their crime exposures.
Transport Exposures
You may not realise it, but transport exposures for motor vehicle dealers are vast. In fact, any property that’s unique or valuable, in transit, in your temporary care, stored at fixed (but movable) locations or used to transfer information represent an exposure.
Following an incident that leads to property damage, vehicles held for sale, accounts receivable, computer equipment, vehicles stored off-site, and data and records related to vehicle manufacturers and customers represent potential losses for your business. Cover such as goods in transit and stock throughput insurance can help fill these gaps.
Public Liability
Public liability exposures at motor vehicle dealerships can directly affect customer safety and, when injuries occur at your business, you could be held responsible. Accidents related to slips, trips and falls are a source of concern. Slippery or uneven surfaces, under-lit exteriors and poorly inspected vehicles can lead to accidents.
Environmental Liability
Due to the presence of petrol tanks and toxic or flammable chemicals such as oil, grease, hydraulic fluid and other substances, motor vehicle dealerships must contend with the possibility of environmental liability in the event of a spill, fire or similar incident.
Environmental incidents are particularly concerning for motor vehicle dealers because they can cause harm to the surrounding community, involve costly clean-up and often cause damage to a business’ reputation. What’s more, businesses that cause harm to the environment are at risk of incurring fines that can exceed hundreds of thousands of pounds.
Business Interruption
Continuity is critical in business, and there are few things more important than continuous revenue and cash flow, particularly for small to mid-size organisations. In fact, just one brief business interruption can be incredibly costly for an organisation, often leading to serious reputational damages or long-term closures.
Common interruptions for motor vehicle dealers can include natural disasters, fires, vehicle recalls, cyber-incidents, staff shortages and issues with vehicle manufacturers.
Vehicle Exposures
Because motor vehicle dealers allow customers to test-drive vehicles, transport vehicles between dealerships and lend vehicles to customers who are having their vehicles repaired, motor vehicle exposures are abundant.
While vital for operation, the improper use of a vehicle can lead to potential property damage and liability concerns for the dealer.
While the proper risk management practices can reduce certain exposures, no system is 100 per cent effective in ensuring an incident-free workplace. As a result, it’s all the more crucial to work with a qualified insurance broker to not only assess your exposures, but secure the appropriate cover as well.
