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GM and MetLife’s free car insurance deal may expand

John Egan

How does “free car insurance” sound to you? Pretty good, huh? A program in Oregon and Washington that offers free car insurance may spread to other states — but not without a fight from independent insurance agents.

General Motors and MetLife Auto & Home have received permission from insurance regulators in Oregon, Washington and 15 other states to offer free car insurance to consumers who buy or lease new GM cars.

On July 6, the automaker and the insurer rolled out a pilot program to give one year’s worth of free car insurance to customers in Oregon and Washington who buy or lease a new 2010, 2011 or 2012 GM vehicle from a participating dealership through Sept. 6, 2011.

Oregon and Washington buyers of the Chevy Cruze and other GM cars are eligible for free car insurance from MetLife.

In Oregon and Washington, the free insurance package features liability, comprehensive and collision coverage — coverage that otherwise would cost hundreds of dollars a year.

MetLife spokesman David Hammarström says the two-state pilot project will determine whether the free insurance is extended to the 15 additional states and perhaps others. Those additional states haven’t been disclosed.

Independent agents raise a ruckus

As GM and MetLife are testing the program, independent insurance agents are crying foul. They’ve asked state insurance regulators in Oregon and Washington to look into what they call a “disturbing” program.

PIA Western Alliance, a trade group representing independent insurance agents in nine states, says it’s concerned that the program violates — “at least in spirit” — the insurance regulations of many states, not just Oregon and Washington. The insurance alliance says it’s involved in “ongoing, frank discussions” with MetLife about the program.

MetLife defends the pilot program as being “fully vetted” by Oregon and Washington officials. Meanwhile, insurance regulators in those two states say the program is legal.

PIA Western Alliance questions whether the program is handing out illegal rebates. Furthermore, the alliance complains, the program cuts insurance agents out of the policy-selling process. The nine states covered by the alliance are Alaska, Arizona, California, Idaho, Montana, Nevada, New Mexico, Oregon and Washington.

“Like the rebates auto manufacturers and dealers are famous for implementing, this is an incentive to purchase a new vehicle. Our concern: Insurance is not a commodity like floor mats,” the alliance says in a statement.

Clark Sitzes, executive vice president of PIA Western Alliance, says his group doesn’t want the pilot project to be the start of a “slippery slope,” robbing consumers of professional services provided by independent insurance agents.

MetLife: Free insurance ‘fully vetted’

MetLife’s Hammarström says the program is brokered by an independent insurance agency that came up with the concept. The identity of the agency wasn’t revealed. GM covers the cost of the car insurance, he says, and MetLife handles customer service.

GM and MetLife have received approval to offer their free car insurance program in 17 states.

“The program has been fully vetted and approved in advance by appropriate insurance regulatory bodies in both states,” Hammarström says.

A buyer of an eligible GM vehicle qualifies for one year of car insurance from MetLife if he:

• Has a valid driver’s license.
• Registers the vehicle in Oregon or Washington.
• Does not use the vehicle for certain business purposes.

PIA Western Alliance takes issue with the fact that traditional underwriting criteria such as a driver’s traffic record, age and gender aren’t used in issuing the free car insurance policies.

Under the promotion, a MetLife car insurance policy is provided automatically to someone who buys or leases a qualifying GM vehicle, according to Hammarström. However, a customer can decline the free coverage or can couple the coverage with an existing policy from another insurer. If a customer gives up the free insurance, the cost of the car doesn’t change.

A policyholder can stay with MetLife or jump to another car insurer once the free one-year policy expires.

‘Innovative approach’

Insurance regulators say the GM-MetLife program is allowed under Oregon and Washington state laws. They dismiss PIA Western Alliance’s claims that GM is improperly selling insurance and that the automaker is providing an illegal rebate.

A GM auto dealer’s sales staff “is not supposed to discuss the insurance. There is no application completed by the dealer, and no premium changes hands,” says Cheryl Martinis, a spokeswoman for the Oregon Division of Insurance.

Martinis adds: “The vehicle buyer clearly can choose to use their own insurer and bypass the insurance policy that would be paid for by the vehicle manufacturer.”

Oregon insurance regulators gave their OK to the program following an “extensive review,” she says.

Sandi Peck, a spokeswoman for the Washington State Office of the Insurance Commissioner, says state officials approved the GM-MetLife program with the understanding that GM doesn’t appear to be acting as an insurance agent and that the free insurance isn’t an illegal type of rebate.

“All of that said, this innovative approach to car insurance is a new concept to all of us,” Peck says. “Innovation is often ahead of state law.”

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