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Industry Issue Over Free Car Insurance

New buyers of GM cars are getting free car insurance for one year through MetLife. The agreement between the auto maker and the insurer is intended to be mutually beneficial, bringing new customers to both companies. Independent insurance agents have expressed their displeasure with the arrangement, feeling it gives MetLife an unfair advantage in a highly competitive market.

Test Marketing

The deal is only available in the states of Washington and Oregon and began on July 6, 2011. In order to be eligible for the free insurance deal, buyers must purchase a 2010, 2011 or 2012 Cherolet, Buick, GMC or Cadillac car, crossover or truck. The coverage includes liability, comprehensive and collision and exceeds the minimum limits for the two states where it is being offered. The program is currently scheduled to run through Sept.6, 2011.

Making Cars More Affordable

GM is hoping to stimulate car sales by making new cars more affordable since car insurance adds a substantial amount to the cost of a new car. For MetLife, the goal is to cut the number of motorists who allow their insurance to lapse. MetLife is involved in a number of auto safety programs and hopes that this program will lead to greater responsibility among new car purchasers. Even though car insurance is mandatory in the United States, an increasing number of drivers are letting their auto insurance lapse.

Another Bonus from MetLife

The free car insurance covers the owner of the car and anyone driving the car with the owners permission for one year after the date of the purchase, provided the owner keeps the car. It also covers cars which are being leased. It only applies to those using the car for personal use; businesses that buy or lease cars are not offered the free insurance. If the car is damaged beyond repair in the first year after purchase, MetLife will replace it with a new car with no deduction for depreciation.

Controversy Over the Program

Clearly, MetLife hopes to increase their share of the auto insurance market through their deal with GM. Drivers have the option of renewing with MetLife at the end of the free coverage or they may choose a different insurer. Since GM’s free insurance program is exclusively through MetLife, independent insurance agents are angry over the deal, believing it will cut into their sales. Free car insurance is not the only deal being offered by MetLife.

Teen Driving Program

While most insurance carriers hope to encourage safe driving through lower premium rates on young driver insurance, MetLife has added an extra incentive for teen drivers. Teen drivers insured through MetLife who do not have an accident for a full calender year earn a $50.00 American Express Reward Card. Since teens often do not pay their own auto insurance premiums, it is hoped this cash bonus, paid directly to teens, will help cut the accident rate in this high risk group. This results in cheap auto insurance for teenagers.

Although the anger of independent insurance agents is understandable, any program which encourages drivers to be more responsible is to be applauded. The leading cause of mortality for most age groups in the U.S. is injuries received in auto accidents. By encouraging financial responsibility, MetLife and GM are providing a valuable public service regardless of their motivation.

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