Toyota has insurance covered

UPDATED: 14/07/2014 10:45amTOYOTA'S plan to shake up the insurance market with a unique policy for its dealers has met with a warm reception from its Australian dealer network, and leading industry bodies.

In less than three months more than 10 per cent of Toyota dealers have signed up for the new dealer House Account policy, which covers dealer premises and inventory and many other risks faced by dealers.

The new policy has been pulled together by Toyota Financial Services, in conjunction with two underwriting companies.

TFS is a wholly owned subsidiary of Toyota Motor Corporation and offers insurance products to car buyers as well as dealers around the world. It has a balance sheet exceeding $A150 billion.

TFS and the two underwriters, Aioi Nissay Dowa and Zurich Australia, are hoping to disrupt the current market, which is both extremely competitive and a bit muddled, at least from the dealers’ point of view.

“The dealer House Account is an extraordinarily complicated policy,” said Patrick Tessier, chief executive of the Australian Automotive Dealer Association.

Mr Tessier said House Account insurance was complex, covering a variety of risks including stock on display, the many different staff members and potential buyers who can drive the cars, hail, flood, fire and many other risks.

“It’s a very big expense for dealers and I applaud Toyota for introducing more competition into the market.”

TFS and the underwriters have developed a novel policy where TFS is the insured party and dealers can attach themselves to that policy, if they meet certain criteria. Each dealer premium is adjusted for local or regional risk.

“We wanted to challenge the status quo of dealership insurance,” said Don Rossell, general manager for insurance and operations for TFS in Australia.

“We believe our dealers should not be bound by the conditions some insurers were pressuring them into and, by tapping into the buying power of the Toyota dealer network as a group, we’ve been able to create real value for our network.”

The fact that Toyota’s 190 dealers are spread across the continent gives the insurance policy great geographical diversity, effectively spreading the risk across many areas and risks.

The new House Account policy came as a relief for Chadstone Toyota principal Graeme Ward, who said there was a great need for a better policy.

“The House Account insurance product gives us better cover in all areas of risk and is cheaper,” he told GoAuto.

“It gives the whole Toyota dealer network a level playing field and I don’t think it will take long for other dealers to move across.”

In fact, he predicted many dealers would move across early in the new financial year, as their old policies expire.

He said the eligibility criteria a dealer has to meet to participate in the House Account program were not onerous.

“I think any dealers who use TFS floor plan finance will have already met the bulk of the criteria that are used under the House Account insurance.”

The deal with TFS and Aioi Nissay Dowa gave Zurich Australia a chance to enter a market that was effectively closed to the company, said Sean Walker, Zurich’s general manager of underwriting – corporate.

Mr Walker said the House Account policy was always bundled up with other, more profitable policies, making it hard for a dealer to judge what sort of value the premium represented.

“The dealer House Account has traditionally been a product that has been cross-subsidised to some degree with the more attractive products in that marketplace for insurers: the higher-volume products like the retail covers that are sold through the dealerships, the statutory covers like compulsory third party and bodily injury as well.”

Mr Walker said the bundling together of policies meant that dealers often were not able to achieve the level of cover they wanted or the types of arrangements they needed for their businesses.

“That’s why Toyota has acted, because the dealers have been giving them some pretty robust feedback about their dissatisfaction with that situation,” Mr Walker said.

Mr Walker said Zurich could only have entered the House Account market if it was backed by the strength of Toyota and the size of the Japanese car-maker's dealer network.

“Capturing a large segment of that (network) in this group arrangement, in my view, can be described as disruptive, given that they probably represent 30-40 per cent of the overall dealer House Account market.

“The thing that is unique about it is that it is very dealer-focused in the sense that it has been designed to remove the frustrations of that annual transaction for renewals with various different insurers and brokers from the dealership entirely.

“Now they can focus on what they do best, which is selling cars and dealing with customers and managing their business,” Mr Walker said.

Mr Walker said the basic policy is with TFS and was essentially a corporate deal, as opposed to writing many separate contracts with the dealers.

“We provide a very high level of cover and a very simple standard policy wording that covers all aspects of the dealer’s business.

“It is a simple and elegant way of managing the risk and it … develops a well diversified, sustainable pool of premium across various geographies and exposures.

“That gives us the ability to transact it more efficiently, it gives us the ability to be able to price more relevantly and accurately over time and, obviously, the more people there are in our program, the more credibility we have in our numbers to be able to project the performance of the program and deliver a sustainable result for all parties.

“It is one of those unique propositions that doesn’t come around very often but one we have so far been very happy with.”

Mr Walker said Zurich wanted to sign up all 190 Toyota dealers around the country, but he said the company expected to have between 50 and 70 per cent of them on the books after five years.