Why auto dealerships face a perfect storm of risks

Robert Davis ; 2025-11-15 05:35:51

Brokers and agents must protect dealership clients in a new era of exposure

Motor & Fleet

By Gia Snape

Dec 03, 2025Share

When CDK Global, a leading dealer management software provider, was hit by a ransomware attack in June 2024, roughly 15,000 customers across North America were forced back to pen-and-paper and improvised workarounds during a critical sales window. Dealerships lost more than $1 billion to the outages, according to industry reports.

Over a year later, risks facing US auto dealerships – from cyber extortion and data theft to vandalism and staffing gaps – are converging into a “perfect storm,” according to Rajni Kapur (pictured), CEO of All Solutions Insurance, a California-based agency specializing in auto dealer and garage coverages.

Kapur spoke withInsurance Businessabout how the CDK incident has hardened attitudes on cyber risk and what agents and brokers should be doing now to protect dealer clients.

CDK attack becomes a cyber wake-up call

The silver lining in the CDK Global attack, which created weeks of operational paralysis for dealerships, is that it led to a sharp rise in cyber awareness.

Since that event, dealerships have been taking more precautions around their cybersecurity, implementing encryption for financing documents, and conducting phishing training for staff,” according to Kapur.

“I’ve also seen more dealerships opting for cyber liability coverage, which they didn’t always prioritize before,” she noted.

Carriers have tightened their underwriting stance for dealerships. Detailed cyber applications, mandatory multi-factor authentication, required employee training schedules, and limited access to sensitive customer information have become standard.

In some cases, Kapur said, carriers are conducting direct calls with dealership cyber managers to confirm compliance. “If (dealerships) don’t implement the required measures, the policy may be cancelled,” she added.

High-value EVs increase theft severity

While cyber attacks can compromise vehicle systems, Kapur noted that cyber-related schemes are primarily aimed at customer financial data rather than vehicle theft.

Physical theft, however, remains a significant and growing exposure, particularly for electric vehicles and other high-value models.

Popular models from brands such as Kia, Hyundai, and Cadillac have been common targets, along with high-demand EVs and catalytic converter thefts. “These claims can be quite hefty,” Kapur noted.

Key control is a central point of failure she sees across the industry. On a busy lot, Kapur said, keys can be misplaced, which allows unauthorized test drivers to take vehicles and flee the scene.

Brokers and carriers are advising clients to move to locked, access-controlled key cabinets that track employee key usage, restrict access to high-value models, eliminate unauthorized test drives, and position high-value inventory in secure or indoor areas.

Motion sensors and increased nighttime security patrols are also recommended.

Carriers are increasingly intolerant of repeated theft losses. While a single incident may be acceptable, “if it continues to happen, brokers and carriers don’t like it,” Kapur said. Repeated losses may result in non-renewal or reduced terms.

Holiday foot traffic driving theft and collision losses

While winter weather traditionally tops the loss tally for many dealerships, Kapur said theft and vandalism now rival natural perils as leading causes of claims. Holiday-season foot traffic presents an especially challenging exposure as bad actors take advantage of crowds to gain access to vehicles.

The uptick in customer visits also drives more test drives, more on-lot vehicle movement, and, in turn, more collision activity. Employee-caused damage during vehicle shuffling (already a perennial issue) is rising amid tight staffing and less experienced personnel. At the same time, slip-and-fall exposures also increase with heavier foot traffic.

Weather remains a constant seasonal risk, with storms bringing wind damage, flooding, hail, roof leaks, and fallen debris that can affect both open-lot inventory and indoor showroom units.

Tips for commercial brokers and agents

Amid tightening markets and heightened exposures, dealerships must prioritize thorough coverage reviews and strong risk management. For agents and brokers, rigorous cyber and key control practices are now essential in protecting auto dealer clients.

Kapur urged fellow agents to revisit auto dealer portfolios and verify that foundational coverages reflect current exposures.

Dealer’s open lot coverage remains “one of the most important” protections, she said, addressing losses stemming from weather, theft, vandalism, and on-lot collisions. Ensuring vehicles are insured to value, particularly the highest-valued units, is also critical.

Garage liability and garage keepers liability are also essential. Kapur noted frequent oversights in garage keepers coverage, especially the need for “direct primary” protection to ensure customer vehicles in the dealership’s care are covered for weather or collision events.

For larger lots with higher inventory levels, Kapur recommended umbrella limits between $2 million and $5 million, and up to $10 million for the largest operations.

“When we review existing policies, we often find missing pieces,” Kapur said. “We then recommend that the dealership add whatever is missing so their coverage is as complete as possible.”