RISK & INSURANCE®
POWER BROKER®: AUTOMOTIVE
AVP/Client Advocate Willis, New York Broker Gears Up This is the year Christopher Fletcher, AVP and client advocate of Willis of New York, has been waiting for. It’s the year the MV-1, a car built from scratch specially designed for wheelchair-users and other people with disabilities, made it out of the factory and onto dealer showrooms. That meant the manufacturer’s property, casualty and workers’
comp insurance contracts, had to be signed, sealed and delivered.
“I’ve never fought so hard to hold on to a broker than in past couple of years,” said Joe
Vecchiolla, chief financial officer and executive vice president of Miami-based Vehicle Production
Group LLC, which manufacturers the $40,000 car. “He’s really become our risk manager,”
Vecchiolla said. “I don’t think of him as the insurance guy.”
For a broker, that is perhaps the ultimate compliment. Fletcher is no longer the outsider – if
he ever was. He’s now an insider, and a key participant in a bold automotive experiment. Not
only was product liability coverage particularly important since this was a new car but insurance
contracts covering vehicle assembly, parts, warranties and contractual obligations with the newly
signed dealers required increases in the excess layers. Calculating the per-part failure rate to
figure out the extended cost of all the potential warranty awards per vehicle and transferring that
risk away from the company required some special analytics. Big-time investors like T. Boone
Pickens are backing the $300 million project, so umbrella coverages had better not spring a leak
– especially as the company gears up to produce 30,000 vans per year.
Vice President Marsh, Columbus, Ohio Broker Steps Up in the Midst of Crisis When a global giant like Honda cancels its indemnity program, as it did last year, it sends shudders through the rest of the supply chain: brake, airbag, piston, engine block and axle manufacturers. Honda suppliers, rolling along under the protection under a master claims-made product liability policy issued in Japan, were suddenly
left scrambling to find cover under a U.S. product liability policy, which is occurrence-based.
Enter Iwao Hatanaka, vice president with Marsh Inc. based in Columbus, Ohio, who stepped
in and helped dozens of risk managers bridge the differences between the now-invalid Japan
policies and the new U.S. policies. Many clients, in fact, saw their product liability premiums
drop. For one brake supplier, Hatanaka was able to secure a $4 million primary product liability
policy in the United States with a global policy sitting on top of the U.S. placement.
“Hatanaka explained how product liability coverage would have taken place had we gone
through Japan,” said a manager working for one of Honda’s suppliers. This supplier was told
product liability coverage would be dropped with renewals last April, three weeks after the
tsunami led to massive delays in shipping new cars. “In the end we didn’t go through Japan
and product liability coverage has come out to be cheaper,” the manager said. “It’s the first
time this kind of thing has happened to me, and I’ve been here 12 years.”
In the wake of the tsunami, sales forecasts for many Honda suppliers were lowered and
Hatanaka asked carriers to adjust premiums due to lower predicted sales volumes, which
carriers in fact did.
Senior Vice President HUB International Burnaby, British Columbia LeGear, Your Eyes and Ears in Overdrive Wayne LeGear, Burnaby, British Columbia-based senior vice president of HUB International Insurance Brokers, focuses almost exclusively on automotive dealers. And when we say focus, we mean a forensic focus. It’s almost as if LeGear, a 26-year veteran of the
automotive insurance brokerage trade, should be on a television detective show.
Over the past year, LeGear handled a complex crime loss involving hundreds of cars for
one of his big clients. LeGear’s work resulted in the maximum amount being repaid by the
underwriter of the policy.
“There were a lot of reasons or hang-ups and sticky bits and reasons why it might not have
been paid,” said Mike Trotman, president and CEO of Trotman Auto Group, which owns five
dealerships in the Vancouver area. LeGear stepped in and managed to get the maximum
reimbursement allowed under the policy, Trotman said.
You want to talk about value added? In another instance, LeGear tipped off Trotman to a
Hyundai dealership that was up for sale.
“Those things don’t trade on the open market and when you’re purchasing a desirable
brand like that you have to be networking to know that it’s for sale and you have to fight it out
with others who want to buy it,” Trotman said.
“Whether you want to measure over last year or over the grand scheme,” said Trotman, “the
reason we do business with HUB is solely because of Wayne.”
Michelle Scott Senior Vice President Aon, Franklin, Tenn. Broker Sweats the Risk Management Details Michelle Scott, senior vice president, account executive with Aon Risk Solutions, sweats the details for her clients as she makes a name for herself by improving the risk management operations for the automotive retail niche. One of her clients, a nationwide automotive retailer with 4,600 locations, was storing flammable materials and aerosols on site. In
the soft market over the past three or four years, management could overlook the issue.
Not this year. As prices hardened, the exposure was “starting to have an impact on our
ability to place insurance,” said a senior manager with the retail chain.
Scott, a former retail risk manager, came up with a low-cost solution, and the manager
said he expects “a lot better results,” come renewal time in March 2012. She also improved
this retailer’s property coverage by putting in place a high-deductible program and then
convincing the carrier to front the risk.
For another client, Tractor Supply Co., a Brentwood, Tenn., based retail farm and ranch
store brand with more than 1,054 stores in 44 states, Scott and her team zeroed in on the
workers’ comp program and reduced the retailer’s premiums by 10 percent, said Donna
Williams, director of risk management for Tractor Supply. “In addition, they negotiated a
three-year deal so our rates are locked in until 2014,” Williams said. “She has a very witty
personality but more so, she is just a very sharp professional that wants you to succeed.
She’s willing to let you take all of the credit and just sit back and enjoy it from the sidelines.”
Managing Director Marsh, Chicago Broker Works his Way from Outside to Inside When your clients include global truck makers and key automotive industry suppliers, you know you’ve been given responsibility for handling accounts with complex risks and global exposures. That is the case with the workload of Bruce Ludwig, a managing director and 26-year veteran of Marsh Inc.
Ludwig, based in Chicago, sits high above the “placement broker” position, and uses
his skills and Marsh’s bench depth to modify a client’s risk transfer protocols, solve clients’
problems, develop strategies to lower the variable cost of risk and restructure plans to reduce
retained losses. Ludwig, who one risk manager considers an “inside participant” in his risk
management department, let the renewals do the talking this year.
“We had a stellar round of 1/1/12 renewals in our property program and we’ve seen a
big drop in property renewal rates, even with what happened in Japan,” said the director of
corporate risk management for a global supplier to the automobile industry. The program was
renewed with a 12 percent decrease in premium. The good renewal results were unexpected,
given all the noise carriers were making early last year in the global property markets about
losses and the need to raise premiums. Ludwig managed to obtain the renewals by improving
his client’s risk profile.
One corporate insurance manager with a truck manufacturer said Ludwig’s assistance on
its August renewal of its excess liability meant the program was up 3 percent even as the
company’s truck-unit exposure was up about 20 percent with the improvement in the economy.
Barry Tornow, CPCU
Senior Vice President
A Broker You Can Lean On Veteran broker Barry Tornow, senior vice president with Marsh Inc., is the quintessential service provider, developing high customized liability insurance programs with low self-insured retentions and dual coverage triggers. For one client, a start-up electric car manufacturer with limited
ability to self-insure for product liability, Tornow guided the company through a lengthy due
diligence process. In the end, Tornow secured a barrage of A-rated carriers for the client.
“Our agreements require us to not have anything near the kind of coverage that we have so it
was a very big score for me internally,” said the assistant general counsel for the company.
From the start Tornow treaded his start-up client as a full-fledged auto maker. “He didn’t
treat us like a start-up company, and the amount of work he put in was above and beyond,”
the general counsel said. “I’m tougher now on other people because he set the bar so high.”
The general counsel, who was new to the field, relied on Tornow to build a product and
commercial liability program from scratch. Her broker was ready to field her calls early in the
morning and late into the evening, she said. “I was new to the field and he was always so free
and available and he would track down people,” she said. “That was unheard of for me.”