Creativity Holds the Key to Dealer Open Lot Market

Creativity holds the key to placing risks in the difficult market for dealer open lot coverage. Capacity remains very tight as some markets have exited altogether while the remaining ones are generally willing to offer only smaller limits. Few excess and surplus carriers are showing an appetite for the risk. Out of necessity, many auto dealers are taking lower limits and higher deductibles to fit coverage within their budgets. It’s a market where experienced brokers really make a difference.


The shrinking capacity comes as insurers have become increasingly wary about attritional risks, particularly for hail-related damage with insured losses counted in the tens of billions of dollars in recent years.

Insured losses from convective storms in the U.S. hit $30 billion in 2020, up from $20 billion in 2019, according to Munich Re.1 Of the roughly 100,000 thunderstorms that hit the U.S. each year, about 10 percent reach severe levels, according to NOAA. The concern for insurers is that a hailstorm can cause millions of dollars in damage to autos on a single lot in minutes.

The dealer open lot market continues to harden, particularly in states with heavy hail claims such as Texas, Colorado and Oklahoma. Placing coverage is less difficult for larger dealers as larger chains are seen as better risks than say a single location used car lot. Used autos are much harder to place than new models. Insurers are more open to insureds with a good loss history and proven weather risk management practices such as getting as many vehicles indoors as possible when hail is in the forecast.

Rates have been rising significantly and insureds that need to replace coverage may find themselves paying a multiple of their previous rates. Insured can expect to pay significant per-vehicle deductibles, ranging from $1,500 to $3,500 per car, and sometimes higher. In some cases, insurers may want a per occurrence deductible in addition to the per-vehicle retention. Markets are more favorable for dealers that are willing to take large per occurrence retentions, which is taken as a sign that the insured is not trying to capitalize on opportunistic claims.

Insureds need to be willing to provide very complete submissions including full financial data, monthly inventory lists and very concrete numbers of average and maximum numbers of autos on a lot as well as how many cars are kept indoors. Detailed data helps to show that a dealer is well managed.

Deductible buy-downs may be an option as well as stop-loss coverage, but that coverage may be fairly limited. Where deductible buydowns are prohibitively expensive, a dealer may seek to use parametric coverage to help fill that gap.

Dealers have a growing number of choices for parametric coverage, which pays out when hail stones exceed a certain size in their area or on the lot. In some cases, the parametric coverage provider places sensors on a dealer’s lot to record the size of hail stones. When hail exceeds the threshold size, the payment is automatic, whether or not the dealer actually suffers a loss.


Creativity and expertise are critical in placing dealer open lot coverage. Experienced brokers that know the markets and have established relationships can help find the optimum available coverage in a very difficult market.


  • JJ Morrow, Senior Vice President – Property, CRC Group, Chicago
  • Mark Sangenito, Vice President – Property & Inland Marine, CRC Dallas Property Team


  1. Record hurricane seas and major wildfires – The natural disasters figures for 2020, Munich Re, Jan. 7, 2021,