Now I know most of you who read this column do your best to “sell” insurance coverage mostly on the quality of the coverage and services that you provide, as opposed to just on price. However, have you ever given any thought on how you would continue this business practice of yours if well, let’s say, your competition was giving away the coverage? “Sounds ridiculous”, you say? Well, read on…

First off, let’s talk about who your competition really is. It may be another agent in your area, or maybe one in a neighboring town. It may be Flo selling direct, or a gecko, or some guy who DJ’s on the weekend. But did you ever think that Detroit, yes MOTown, would also compete with you when it comes to selling car insurance? Yikes! What would Lee Iacocca say about that?!

Think about this, how many of you know of agents who have auto dealer friends who may refer a piece or two of business to the agent when they sell a car? Not a bad arrangement, the car salesman refers someone to the insurance agent, and when the agent knows of someone who is in the market to buy a car they send the prospect to the car dealer. However, how would that arrangement work if the car dealer, or should I say the auto manufacturer, was including the insurance in the price of the car? Not legal? Perhaps not in most states, but in Oregon and Washington states this is now happening.

Auto giant General Motors has now begun offering a free year of car insurance with the purchase of any of its new vehicles. Although it is only a pilot program, it has already begun to grab the auto market by the horns as this deal applies to all 2010, 2011 and 2012 model year Chevrolet, Buick, GMC and Cadillac cars, trucks and crossovers purchased by September 6th of this year. Their target market: anyone with a valid driver’s license is eligible; unless of course the customer is a fleet or commercial business then the offer is not applicable.

The coverage is underwritten by MetLife Auto and Home and includes coverage for both liability and physical damage. According to an advertisement by General Motors, they state that the limits being offered “exceed the minimum coverage in both states” and, as of this printing, I have not been able to determine if whether or not a customer can increase coverage for an additional premium to be paid by the customer. With that said, however, one would think that General Motors would at least have to offer the minimum coverage that any finance company would require, which is obviously higher than any state requirements anyway. GM states that there is no discount for consumers who decline the offer and purchase coverage on their own. MetLife states that its policy includes also the replacement of new vehicles that are damaged beyond repair within the first 15,000 miles or the first year, whichever comes first. In addition, MetLife also states that this policy being offered does not require out-of-pocket expenses to make up for the depreciation of the car at the time of the accident.

Both GM and MetLife state that customers can seek to renew the policy at the end of the first year of ownership, but there is no guarantee that the policy will be renewed. General Motors says that it is looking to determine the customer appeal of including standard insurance coverage with its vehicles, but has not indicated whether or not it will expand the plan to other states. Chris Perry, U.S. Vice President of General Motors Marketing has been quoted as saying, “We want to give residents of Oregon and Washington another reason to discover Chevrolet, Buick, GMC and Cadillac vehicles.” If the program is a success, GM says that they may roll out it out in other states. However, at this time General Motors says that it chose those two areas because GM has had a hard time gaining market share in those two states, despite an overall country wide sale increase of 11% so far this year.

According to the website www.cadillac. com/insuranceoffer, the official GM offer is as follows:

The program applies to eligible new 2010, 2011 and 2012 model year vehicles only;
The program is currently available only to residents of the States of Oregon and Washington, regardless of where the vehicles are purchased or leased; a participant must have a valid driver’s license;
The program is not available to purchasers/ lessees who: (i) use a GM Fleet Account Number to purchase a vehicle; (ii) transport goods or people for a fee, (iii) use the vehicle in a commercial fleet; or (iv) allow the vehicle to be driven by the purchaser/lessee’s employees;
The policy limits applicable to the insurance coverage and deductibles from MetLife Auto & Home are as follows. Questions should be directed to MetLife Auto & Home (see chart on next page)
The program may be discontinued at any time, however, the insurance provided under the program, once an eligible vehicle has been delivered, may not be terminated by GM;
Customers may be asked to provide personal information to MetLife Auto & Home, in order to enable it to rate their policies, so it can dispatch a bill to the auto manufacturer. MetLife Auto & Home may use information provided by Consumer Reporting Agencies, such as credit, driving record and claim history. This information gathering process does not impact the customer’s eligibility for the program, as coverage is issued to all eligible purchasers of qualifying automobiles who are licensed residents of Oregon or Washington;
The customer may refuse the insurance, but he/she may not refuse the insurance and receive a credit against the cost of the vehicle equal to the cost of the insurance;
Eligible customers will be offered replacement policies at the end of one year at a premium to be determined by the insurer, but it is each customer’s responsibility to obtain replacement coverage at the end of the policy term. The insurance policies will not be automatically renewed or replaced;
Coverage is not guaranteed to be issued by any particular carrier after the program policy term, or at any particular premium;
The customer will have to pay the cost of insurance beyond the first year;
The insurance is provided by Metropolitan Property and Casualty Insurance Company, or one of its affiliates (collectively operating as “MetLife Auto & Home®”): Economy Fire & Casualty Company, Economy Preferred Insurance Company, Economy Premier Assurance Company, Metropolitan Casualty Insurance Company, Metropolitan Direct Property and Casualty Insurance Company (CA Certificate of Authority: 6730; Warwick, RI) Metropolitan General Insurance Company, Metropolitan Group Property and Casualty Insurance Company (CA COA: 6393; Warwick, RI), and Metropolitan Lloyds Insurance Company of Texas, all with administrative home offices in Warwick, RI. Coverage, rates and discounts are available in most states to those who qualify;
The terms and conditions of the coverage provided are specified in the policy and all applicable endorsements, which prevail over any advertised description of the program of the insurance provided thereunder;
Customers must take retail delivery of an eligible vehicle by 9/6/11; and
In the state of Washington, if the vehicle is replaced for any reason, credit for any unearned premium cannot be transferred to the replacement vehicle.

At the end of the one-year policy term, consumers who are part of this promotion may opt to renew with MetLife. As we are all aware, the cost of coverage at that time can vary significantly depending on the underwriting factors. But according to the Insurance Information Institute, consumers on average paid $727 for auto insurance in Oregon. In Washington, the average premium paid was $840. Nationwide, the average premium paid for auto insurance was $789 a year.

In my opinion, this is an incredible marketing scheme from General Motors, because lets think about how many car deals are lost because of this thing of ours? When you factor in the average auto policy premium as mentioned above, how much different is it from the manufacture rebates that we have all been lured into dealers with? In addition, I also applaud MetLife for jumping on this opportunity as I am sure that once the consumer has the car, how likely are they to sell it the following year once their premium is adjusted to where it should be? Chances are the consumer will renew the policy if the offering is made available by the carrier, and if a renewal is not offered think of all of the high premium policies that will be available for the local agents to sell when the soon to be uninsured owner of a “one year old CTS” start to shop? If you currently don’t have a real time personal lines comparative rater in your office, now is the time to call me!

All is quiet on the convention front, but there are a couple of summer events planned in the very near future that we will talk about next time. In my travels lately it was great to see people like Steve Desino from Pinnacle Insurance Agency (don’t forget I KNOW people, Steve!); Lynn Bove from CBS Coverage (thanks so much for the very kind words, Lynn!); Richard Marks from the Jerome Marks Agency (thanks for sharing those baseball stories with me!); and Christine Flood (you really LIKE tofu, Chris?) from Eastern General Insurance.

Until next time, enjoy the summer, be safe, and Ciao for now!

Do I Get Free Maintenance With That Policy?

Michael Loguercio