Agents Don't Like GM's Free Insurance Offer
Car shoppers in the Pacific Northwest have a new feature to consider when they are looking for a new car: Insurance. Chevrolet has started a new program in which it provides a year of car insurance coverage for each new car purchased through a Chevrolet, Cadillac, or GMC dealer. While sales numbers have improved, some individual insurance agents are concerned that the offer could be more complicated than it seems.
Limited to Washington and Oregon
The only two states that have approved the free insurance offer are Washington and Oregon. Chevrolet chose to present the offer in those states because their sales had been falling in recent years. This creative new car-purchasing perk is designed to draw in customers who might have previously avoided buying a brand new car because of the cost of insurance. If the program continues to be successful, Chevrolet plans to extend it to other states over the next few years.
Free Policy Coverage Exceeds State Minimums
The car company is offering a full year of liability and personal injury coverage through an affiliation with MetLife Auto Insurance Company. The coverage is included as part of the regular paperwork when a customer purchases a new vehicle. Chevy decided to try this new tactic after receiving feedback from customers who complained about the complexity and cost of setting up a new car insurance policy. The free coverage offers more than the state's minimum for liability and personal injury, with a $500 standard deductible.
Customer's History Does Not Affect Eligibility
This new marketing campaign might be especially successful with customers who can afford to purchase new cars but wouldn't qualify for a good insurance rate through a traditional insurance agreement. The insurance coverage is offered to each customer, regardless of the customer's driving record or other risk factors that generally drive up the price of car insurance. After the first year of free coverage, the customer will face the normal application process to continue the coverage at a rate that would be appropriate for their risk level. The full year of free insurance provides at-risk drivers with a solid year during which they can potentially improve their driving record or credit rating or other factors so that they are better insurance risks when renewal time comes around again.
Sales Improving with Free Insurance Program in Place
Chevrolet dealers in Oregon and Washington have posted substantial improvements in their sales numbers since the program started. Overall, new car sales are up by 11% this year, with retail sales topping the 16% mark for sales that do not include fleets or commercial vehicles. The insurance program does not apply to fleet sales or commercial sales, so improved numbers in those areas would not reflect a direct influence from the new marketing technique.
Drivers Can Choose to Renew or Replace Insurance after One Year
MetLife Auto will cover each new car for 12 months after the purchase date. At the end of that time period, customers have an opportunity to renew the policy, make changes to the policy, or use a different insurance carrier altogether. During the first year of free coverage, the customer does not have as much flexibility to make changes to the insurance policy. If a customer does not want the free insurance policy, they have an opportunity to decline during the purchase process when they buy their new car. Declining the insurance policy would not reduce the purchase price of the vehicle, though.
Insurance Agents Concerned About Potential Legal Problems
Local individual insurance agents have raised several concerns about the free coverage. The main problems they worry about are legal issues that could arise from a complicated car accident. They are calling for the state insurance commissioners to reconsider the regulatory and licensing concerns regarding the insurance coverage. Individual car insurance agents in both of these states sell MetLife Auto insurance, so agents could be facing a reduction in their sales as more customers choose to purchase cars that automatically come with MetLife policies instead of seeking a policy through an individual agent.
Coverage Details are Unclear in Some Situations
Agents are also curious about how the insurance coverage would handle special situations. If the customer has more than one vehicle, for example, it is unclear whether they can add that vehicle to the new policy. Some insurance plans require that all of your vehicles be covered by the same insurance policy in order to retain coverage on any of your vehicles. If MetLife Auto covers the new car through the free policy, it would void the policy that the customer had already purchased. Insurance companies nationwide could create problems for the offer if it expanded to more states.
Offer Unlikely to Be Used by Other Manufacturers
Insurance specialists don't believe other car manufacturers will pick up the free insurance offer as a workable discount system. GM is not the first company to offer free insurance for new customers. Volkswagen United States provided free coverage for new customers in Wisconsin and Illinois in 2004 and 2005, but the promotion did not last longer than those two model years. Many people expect the GM offer to decline as quickly as the Volkswagen plan because of complications.
Insurance Commissioners Okay with the Offer
The Oregon and Washington insurance commissioners have given their approval for the free insurance program, despite concerns raised by individual insurance agents. They determined that the coverage is essentially group auto insurance under the ownership of General Motors. Some analysts argue that rate policies with the free insurance program are contrary to the standard rate policies of each state where the program is being offered. Even though the program presents unique challenges not faced by either state previously, nothing in the program violates any of the current insurance regulations on the books in Oregon or Washington.
