The Private Brand Tire Group (PBTG) wants to save its members money on escalating insurance costs and is trying to develop a program that grants group discounts on premiums.
PBTG Executive Director Don Dominguez said the group is looking at establishing a ``captive insurance'' company through Towson, Md.-based MIMS International Ltd. Such a policy would protect individual private brand marketers from going out of business due to a catastrophic accident or event, Mr. Dominguez said, calling liability insurance one of the tire industry's most pressing concerns.
``The calls that I get most frequently are the calls related to insurance,'' Mr. Dominguez said. ``Insurance is going up again this year. It's just getting out of hand.''
He said most of the Clearwater-based PBTG's members are wholesalers who, at times, do have a ``few fender benders here and there'' with their delivery trucks. He knows of one member company that was dropped by Universal Underwriters because a few mishaps raised its insurance rates.
``There's a lot more control when you set up your own captive insurance company,'' he explained. ``It's basically your insurance company.''
Under captive insurance, members of an association own the policy but are ``fronted'' by a traditional insurance company that assumes financial responsibility for the captive's business, according to information on MIMS International's Web site.
Much like auto insurance deductibles and premiums, Mr. Dominguez said private branders could, for example, be responsible for paying a cap of 20 percent of the cost of accidents. The program, he said, would operate by the same philosophy as any other association benefit: strength in numbers. Private branders would receive the benefit of group rates, yet an individual company with a proven record for safety wouldn't be pegged for a higher premium because that's the industry standard, according to Mr. Dominguez.
If association members chose to, individual marketers could form a ``cell'' that segregates members' risks from one another. A cell would require its members to have a minimum of $1 million in premiums-a prospect which Mr. Dominguez admitted first concerned him.
``That kind of scared me off a little bit until I did my own research,'' he said. After calling a few tire dealers operating only a store or two and finding out they pay annual workers comp and insurance premiums of $25,000-$30,000, Mr. Dominguez realized that a cell of private branders could easily attain $1 million in premiums. If a member in the cell was sued for some mishap, the other members in the cell wouldn't see their rates rise as a result.
Another benefit to captive insurance, he added, is that companies that import tires can save money on liability too, because the program would cover a business loss incurred from a situation such as a country breaking trade relations with the U.S.
Mr. Dominguez emphasized that many details still need to be discussed with PBTG members before he could release any insurance quotes. The association plans to meet during the summer to discuss the insurance program, and if members accept, Mr. Dominguez hopes to implement the program by September.
``We've looked at this long and hard,'' he said. ``There's no question that we can save the typical dealer a pretty good deal of money.''
He also said that if the program proves to be a success, he would invite members from the Tire Association of North America and International Tire & Rubber Association to join, as well.
Ross Kogel, TANA executive vice president, acknowledged that the soon-to-be united association would need a new policy for liability insurance and is looking for any avenue to solve the problem of rising insurance costs.
``We've been looking into captive insurance programs for a very long time, and we'd be willing to look at any and all options possible,'' he said.
Though nothing is finalized yet, Mr. Dominguez said he likes the prospects of a captive insurance plan and would welcome inquiries from private branders or dealers (he can be reached at (727) 530-5090).
``I'm pretty excited about this one, because when we get it off the ground, it's going to be meaningful to a lot of tire dealers,'' Mr. Dominguez said.