(October 2022)
Rating auto dealer exposures has more in common with Commercial General Liability rating than with Auto rating because it is based on the number of employees and the values of the vehicles in a given auto dealer operation.
Rule 48. Auto Dealers–Eligibility in the Insurance Services Office (ISO) Commercial Lines Manual, Division One, Automobile lists nine eligible classifications:
Employees–Other Than Trailer Dealers
Class I employees are the businesses' active owners, partners, officers, salespersons, general managers, service managers and any employee furnished a dealer auto or whose primary duties include operating autos. A 1.00 rating factor is applied to develop the number of rating units. The total number of Class I employees who work less than 20 hours a week is multiplied by .50, and the result is added to the number of Class I employees.
The second group of Class I employees do not have vehicles furnished to them and do not meet the other criteria. A .40 factor is applied to develop the number of rating units. If any of these employees work less than 20 hours a week, multiply the total number of such employees by .20. Add the total from this group to the number of Class I employees.
Class II refers to non-employees who are furnished a company vehicle. A 1.15 factor applies to drivers younger than 25, and a .50 factor applies to drivers older than 25.
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Example: Kenny’s Auto has two partners, one sales manager, one service manager, five full-time salespersons, ten part-time salespersons, four mechanics, one cashier, four full-time clerical, two part-time clerical, and one office manager. One of Kenny's partners supplies his wife and two children, ages 16 and 18, with company owned vehicles. The rating units are: Class I–Group 1: 2 + 1 + 1 + 5 + (.50 x 10) = 14 X 1.00 = 14 Class I–Group 2: 4 + 1 + 4 + + 1 = 10 X .4 = 4 + 2 X .2 = .4 =4.4 Class II–Over 25: 1 X .50 = .50 Class II–Under 25: 2 X 1.15 = 2.3 Total Rating Units = 14 + 4.4 + .5 + 2.3 = 21.2 |
Employees–Trailer Dealers
The only rating consideration with trailer dealers is the total number of employees. There are no factors applied to part-time employees, and there are no considerations for vehicles provided to non-employees. The number of employees is added together and multiplied by .45 to determine the rating factor.
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Example: Let’s change Kenny’s Autos above to Kenny’s Trailers. It has the same personnel of two partners, one sales manager, one service manager, five full-time salespersons, ten part-time salespersons, four mechanics, one cashier, four full-time clerical, two part-time clerical, and one office manager. One of Kenny's partners supplies his wife and two children, ages 16 and 18, with company owned vehicles. The rating units are: 2 + 1 + 1 + 5 + 10 + 4 + 1 + 4 + 2 + 1 = 31 Total Rating Units = 31 X .45 = 27.9 |
After determining the territory in the territory pages, select the loss cost from the Loss Cost page for the particular state and territory. Multiply the loss cost by the company loss cost multiplier to develop the rate and multiply it by the rating units determined above. A rating factor is applied based on the type of franchise. Franchised auto dealers use a factor of 1.00, but non-franchises auto dealers use 1.10. Trailer dealers’ factor is 1.00 but implement dealers’ factor is .70. This is the dealership's liability premium. It can also be modified by experience and/or schedule rating and any other endorsements added.
A medical payment for location and operations is provided in the Auto Dealers Coverage Form. If coverage is not desired it must be excluded, but there is no premium credit. When coverage is not excluded, the medical payments limit per person factor must be multiplied times the liability base loss cost and then by the company multiplier. A rating factor is applied based on the type of franchise. Franchised auto dealers use a factor of 1.00, but non-franchised auto dealers use 1.10. Trailer dealers’ factor is 1.00 but implement dealers’ factor is .70. This must then be multiplied by the rating units developed above.
Dealers Physical Damage Coverage can be rated on a reporting form basis, a non-reporting form basis, or on a specified auto basis. If the reporting form basis is used, the named insured estimates the average value of the inventory and reports monthly or quarterly to determine the actual values at the end of the year. The non-reporting basis requires that the named insured determine a limit and adjust it as necessary to reflect value changes throughout the year. Regardless of the method used, the value is multiplied by the developed rate for the Dealers Physical Damage Coverage selected. Commercial Auto Rules 22, 23 and 24 are used to rate trucks, tractors and trailers and Rule 31 to rate private passenger units if the vehicles are rated on a specific basis.
The premium developed is subject to experience and/or schedule rating.
This coverage is part of the policy unless excluded. There is no credit provided if coverage is excluded, but a charge must be made if coverage is provided. The loss cost for the coverage is found in the state loss cost pages. The loss cost is multiplied by the company loss cost multiplier to develop a rate. A rating factor is applied based on the type of franchise. Franchised auto dealers use a factor of 1.00, but non-franchised auto dealers use 1.10. Trailer dealers’ factor is 1.00 but implement dealers’ factor is .70. Increased limits and deductible factors can be applied. The rate is then multiplied by the rating units developed earlier.
The
named insured selects the limit of insurance to apply to customers’ vehicles
and decides if coverage is direct damage or legal liability. If it selects the
direct damage option, it must then decide if it is to be primary or excess.
Then the named insured must select the coverages to be provided. The loss costs
are developed on the state rate page for the territory and are then multiplied
by the company loss cost multiplier. Deductible factors are available. The
premium developed is subject to experience and/or schedule rating.