Nick Pacifico has been working at his family’s Cadillac dealership in Denver since 2003. He’s never seen insurance costs this bad. “Getting coverage is nearly impossible,” said Pacifico, vice president at Rickenbaugh Automotive Group. Two years ago he paid about $160,000 to insure $20 million worth of Cadillacs and Volvos on his lot, where about a third of the inventory is kept outside. This year he’s paying almost $600,000.
Pacifico is not the only one. Hail is wreaking havoc in the market for auto dealer lot insurance. In 2018, Zurich North America, one of the major commercial auto insurance providers, decided not to renew policies with hundreds of dealerships throughout the middle of the U.S., citing “catastrophic” losses due to hail damage. (In a statement, Zurich said it remains one of the largest providers for auto dealers, including those in hail-prone states.) “Everybody that I know is faced with a very expensive change,” said David Ditgen, who worked at Zurich for 15 years and is now a broker at AutoRisk Dealer Financial Services in Denver.
Understory, a weather-tech startup in Madison, Wisconsin, has a plan to bring down costs and offer dealers a lifeline, according to co-founder and Chief Executive Officer Alex Kubicek. The company is set to announce on Tuesday that it will begin selling Hail Safe, an insurance policy for auto dealers that uses on-the-ground data. Understory makes a small weather station called a “dot” that can measure hail in minute detail. Dealers who purchase Hail Safe will install a dot on their lot and pay an annual premium, then receive an automatic payout if the sensor detects a hailstorm that meets an agreed-upon threshold. The payout happens regardless of actual damage.
“It’s not like a typical loss, where you have adjusters come out and they have to assess damage,” said Ditgen, one of the brokers Understory has enlisted to sell Hail Safe to dealers. “If the weather station says it happened, it happened, and they get their money in a matter of two weeks.” Read the full story here.