Auto, boat, RV and motorcycle dealerships

Auto, boat, RV and motorcycle dealerships

Surrago, James

America’s love affair with the automobile is alive and well. That’s good news for the U.S. economy, and certainly good news for the auto dealership business. For commercial lines insurers, underwriting automotive dealerships is a 63,000 new-business opportunity. That’s the number of dealers-including new and used cars, boats, recreational vehicles and motorcycles spread across the United States.

Employment in the industry and the number of establishments grew over the most recent five-year period. The number of establishments grew by 11% while employment-with one exception-grew twice as fast as the number of establishments. Used car dealerships saw almost a one-for-one growth, particularly in large accounts, both in employment and the number of establishments. Total premium growth was 4% for these industry categories.

While total premiums increased across all SICs, premiums were actually down on a per-employee basis in all categories during the most recent five-year period-a reflection of the continued soft pricing market.

Ninety-six percent of the establishments belong to the small and mid-sized categories, employing fewer than 100 employees. The vast majority of auto dealerships-almost 57%belongs to the mid-sized category, employs between 20 and 99 people, and generates more than $800 million in total commercial lines premium.

Mid-sized boat and motorcycles dealers experienced a high growth over the most recent fiveyear period while used car and recreational vehicle dealerships show high growth in large accounts, employing between 100 and 499 employees.

However, the bulk of the written premium in the used car dealership category (SIC 5520) is generated by small accounts-more than $70 million, or 84%, of the total premium. The other industry groups, new and used car dealers (5510), boat dealers (5550), recreational vehicle dealers (5560), motorcycle dealers (5570) and automotive dealers not otherwise classified are concentrated in the mid-sized accounts, which number 62,000. Nationwide, these mid-sized accounts generate $1.4 billion in commercial lines premium.

In the Rough Notes Midwest region, 11,961 risks account for more than $245 million in commercial lines written premium and employ 245,000. The average account premium of $1,000 per account is 9% lower than the nationwide average.

Of the region’s 11,961 establishments, 94% are small and mid-sized accounts, which is comparable to the countrywide average. Mid-sized establishments alone represent 31% of the total accounts, which is slightly higher than the countrywide average.

The region’s mix of business, by line of insurance, is about the same as the nationwide average.

Copyright Rough Notes Co., Inc. Nov 2001

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