Flood loss prevention: Best practices to protect your auto dealership

Severe weather is an increasingly important factor that dealers must consider as part of their overall risk control efforts. Over the past few years, weather-related claims have quickly become the most expensive peril for many insurance companies. Due to the nature of dealership operations, exposure to the elements is of major concern given that in most scenarios, almost all of the inventory is stored outdoors. This is very different from most industries, where inventory is generally stored indoors — secured and protected from nature.

Changing weather patterns are now a reality throughout Canada, with increases in the frequency and severity of flooding and high winds, historic hail zones showing movement, as well as an increase in forest fires. Given that these changes are difficult to predict and there are more “one-in-a-hundred-year” events taking place, it is difficult for insurers to accurately underwrite coverage for these perils.

As such, insurers are moving to higher per vehicle deductibles and aggregate limits, or no aggregate limit at all. In turn, this forces higher self-insured portions for dealers, which leads to the consideration of options to protect their property, including their inventory.

Here are a few key considerations to help auto dealerships prepare, protect inventory, and minimize the potential impact of a flood event.

Flood loss recommendations:

Store high-valued vehicles above ground (for example, not the basement), preferably in the higher levels of parking garages when possible.
Remove storage from floors to higher shelves in the parts department and basements.
Implement a formal emergency response plan in the case of inclement weather.
1. The plan should include the procedures to:
  1. Designate individuals responsible for the monitoring of weather conditions and communicating the emergency response plan when required.
  2. Determine which vehicles should be moved.
  3. Determine where target vehicles should be moved to.
  4. Determine which staff is responsible for moving vehicles.
  5. Ensure the building is adequately protected.
  6. Ensure that all on-site staff, third-party vendors/contractors, and customers are adequately protected.
  7. Prepare emergency kits.
2. Given that hazardous weather often occurs with little warning, it is important that this formal emergency plan should be reviewed:
  1. Semi-annually (at a minimum).
  2. Prior to seasons where inclement weather is to be expected.
Include high water monitoring in basements as an additional zone to monitored alarm systems.
Backup important electronic data, to either a cloud or off-site.
Ensure emergency lighting or generator backup is in working order.
Inspect roof drains to ensure they are free flowing.
Consider diversifying vehicle compounds. Sometimes, even a lot across the street can suffer much less loss than that of the actual dealership lot.

Suggested solutions for insuring risky weather will vary, with weather data playing a vital role in properly understanding the risk. At Marsh Advisory, we employ some of the world’s leading catastrophic loss experts — utilizing 30 years of storm data and geocodes to properly understand and track the changing weather trends. This technology allows us to map concentrations of values and offer attractive solutions in areas where others may not.

Overall, flood loss prevention is important for protecting lives, preserving property, maintaining economic stability, conserving the environment, ensuring insurance availability, and building community resilience. By prioritizing flood loss prevention, organizations, communities, and governments can work together to mitigate the impacts of floods and create safer and more sustainable environments.

As always, please contact your broker or Marsh Advisory representative if you have any questions or concerns.

Flood loss prevention: Best practices to protect your auto dealership

Flood loss recommendations:

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