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Rapid salvage response is vital to dealership resilience

March 19, 2018

Quick turnaround moving salvaged inventory after natural catastrophes can deliver a competitive advantage.

auto salvage

Look at the scores of shiny, newly minted vehicles on dealership lots – all exposed to potentially catastrophic onslaughts by the elements – and it’s clear that dealers have a great deal on the line if and when disaster strikes. While some severe weather events can provide days of warning, such as the approach of a major hurricane or tropical storm, tornadoes, hailstorms and flash floods can strike without appreciable warning, resulting in millions of dollars in damaged inventory and extended business interruptions to dealerships in their paths.

In the aftermath of such catastrophic events, new car dealers must rely heavily on the speed and effectiveness of their insurers’ salvage team response. When salvaged vehicles are sold individually at auction, clearing out damaged inventory can take significant time and paperwork. It can slow down the process of returning a dealership to its former level of sales activity. It can also impact the salvage value to the insurance carrier, which in turn may affect the dealer’s insurance costs down the road.

We have found that the process of selling the entire damaged inventory in lots, either single lots or in multiple lots as in the case of larger dealerships is a much more efficient and cost effective approach for value recovery. This strategy has been used successfully by Zurich’s dedicated Central Salvage team for a number of years. After titles are quickly cleared through relevant state departments of motor vehicles, damaged inventories are sold in lots under sealed bids. The emphasis is on achieving a quick resolution to the claim so that the dealership can replace damaged inventory more quickly and get back in business.

The value of having a dedicated salvage team with specialized knowledge and experience is more than simply recovering value and potentially minimizing impacts on future insurance costs. Every day that damaged inventory, rather than new vehicles is taking up space on a dealership lot, is a day the dealership is not making sales. This can be particularly consequential when large-scale events result in widespread damage or loss of existing vehicles owned by local residents, causing a significant, short-term surge in demand. This was true after Hurricane Harvey struck Houston, an auto-dominated community with a highly competitive market at any time of year. Houston-area dealers unable to turn over damaged inventories rapidly stood to lose sales to competitors who did, posting some of their best sales numbers in years.

During the spring of 2017, the value of Zurich’s salvage approach was demonstrated after a large, Texas-based dealership with multiple locations suffered the loss of almost 200 new and used luxury models to softball-sized hail. Zurich’s Claims Recovery Services Salvage Team reviewed the dealer’s inventory and developed a marketing strategy the following day. Tapping into their networks, the team located several qualified buyers interested in the vehicles, brokering deals that recovered about $3 million of an estimated $11 million loss and expediting the dealership’s ability to get back in business.

Having the connections with salvage buyers accustomed to bidding on vehicles lots, rather than marketing cars individually at auction, can dramatically hasten the process of getting back in business serving the needs of consumers seeking to replace their lost vehicles, preserving market share and customer loyalty.