Independent insurance agents are raising concerns over a General Motors promotion that offers car buyers in the Pacific Northwest a year of free liability and damage insurance from MetLife Auto & Home.
Hoping to put more drivers in Oregon and Washington behind the wheels of its late model cars, General Motors last week announced that drivers in these states who take delivery of a new 2010, 2011 or 2012 GM car, truck or crossover before Sept. 6 will receive a year’s coverage from MetLife Auto & Home, a company which does business through independent agents.
This departure by the insurer from the agency distribution system has some agents concerned.
Bob Rusbuldt, Independent Insurance Agents & Brokers of America (IIABA) president and chief executive officer, said the marketing campaign presents a bevy of legal issues, which his group has outlined to the insurer.
“We have raised licensing and regulatory concerns, along with important consumer issues,” Rusbuldt said. “MetLife Auto & Home has been open to our concerns and is seriously reviewing them.”
John Timm, president of the Independent Agents and Brokers of Oregon, said GM’s promotion under MetLife’s In the Car program raises “a lot of questions” for consumers.
“If you have more than one car, what happens to the provisions of your own auto policy where you don’t have automatic coverage unless all your vehicles are insured with that company?” Timm asked. “I don’t think the other insurance companies in the country are going to roll over and waive all those provisions.”
Rental cars are another question. “If you go to the airport to rent a car, who is going to cover that? Is it MetLife Auto & Home or is it going to be your current carrier?” asked Timm.
“There are a lot of unknowns; it’s a very vague offer,” said Timm, president of Timmco Insurance Inc. of Portland. “It’s doubtful that consumers will be well served.”
As for chances of a disruption in the marketplace, Timm said he is “skeptical” that the promotion will be so popular that it prompts other car makers to similarly offer no-charge auto insurance.
MetLife Auto & Home did not respond as of press time.
Commissioners OK
The promotion was green-lighted by the two states’ respective insurance regulators.
In Washington, Insurance Commissioner Mike Kreidler (D) approved the program through his office’s Rates and Forms Division. “We looked at the product thoroughly, and it’s our determination that this product is allowed by law,” spokesman Rich Roesler said.
Some producers, he added, have raised concerns that GM is acting as an insurance agent and asked if the In the Car program violates the state law against rebating.
“In our determination, this is a group policy with GM holding the master policy,” Roesler said.
In Oregon, approval came from the state’s Insurance Administrator Teresa Miller. Spokeswoman Cheryl Martinis said the insurance department, in March, “took a close look at it and in the end, we found it was OK.”
The MetLife Auto coverage comes with the purchase of new GM models from the Chevrolet, Buick, GMC or Cadillac lineups.
The Metropolitan Property and Casualty Insurance Co. policies cover liability and physical damage coverage, above the states’ required minimum standard, according to GM.
The policy also covers anyone who drives the car with the owner’s permission, as long as the original purchaser continues to own or lease the vehicle.
Policies have separate $500 deductibles for collision and non-collision coverage. GM’s offer is not available on cars used for commercial or fleet purposes.
A purchaser’s credit information, driving record and claim history do not affect eligibility, as the promotional line of coverage is issued to “all eligible purchasers of qualifying automobiles who are licensed residents of Oregon or Washington,” GM’s terms state.
Rates under the program are not based on factors specific to insureds or garaging locations, but instead on the vehicle’s make, value, horsepower and other factors, said Cece Newell, the Oregon Insurance Division’s property/ casualty analyst.
“It’s contrary to standard rating practice,” she said.
Under the MetLife policy, if a new car is damaged beyond repair within the car’s first year or first 15,000 miles, whichever comes first, the company will repair or replace the vehicle with a new vehicle, without deducting for depreciation.
Offered through Sept. 6, the coverage “at no additional cost” is part of a GM marketing test in two states where the Detroit-based automaker said it has not met its goals for market-share growth.
MetLife’s Metropolitan Property and Casualty Insurance Co., an admitted carrier in Oregon, proposed the program in a regulatory filing in February, Newell said, noting that the GM-MetLife program is like no other insurance program she has seen.
“There were some serious considerations,” she said. “What we have to work with is what the law says, and there is nothing in the law to keep people from being innovative.”
Offering would-be buyers free insurance coverage is not new.
Volkswagen of America had a similar program in Illinois and Wisconsin for purchases of new 2004 or 2005 VW Golf, Beetle or Beetle convertible models. VW provided qualified buyers with policies underwritten by Nationwide Mutual Insurance Co., based in Columbus, Ohio.
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