People who buy autos also buy auto insurance - in fact, they are required to buy auto insurance.
'You can't get a driver's license without insurance. You can't get tags for your car, you can't get a loan without it,' said Fred Browning, Chrysler Insurance Co. president.
So it's logical to assume that autos and auto insurance should be sold together, right?
Actually, they rarely are sold together - but that is changing.
Several automakers, auto finance companies and at least one big bank are hatching plans to steer car and truck buyers to preferred insurance companies. On the auto lending side, players with big plans for marketing insurance include BMW Financial Services, Ford Credit, GMAC and Banc One.
Chrysler Insurance also has expansion plans for marketing to retail customers, but the company has not worked out how, Browning said.
'This is all part of a bigger consumer movement that says consumers are changing the way they buy products. As a seller of products, you have to move through as many means as possible,' said Gary Kusumi, CEO of personal lines for GMAC Insurance Holdings.
Meanwhile, insurance companies are evolving in how they offer insurance.
'There is a growing list of insurers getting involved in affinity programs with employers, where they offer things like payroll deduction, conveniences like that. The next stage is (marketing to) customers of product and service providers,' said Bill Staats, vice president of the Chubb Group of Insurance Cos., which recently paired up with BMW Financial Services NA Inc. (See interview, Page 25.)
Technology also is a catalyst. The Internet makes it easy for a customer visiting a car company Web site to click on an insurance company banner. And telephone call-center technology helps cover odd hours and weekends.
Here are some of the plans that belong to the overall trend:
Ford Motor Co. announced Sept. 9 it will endorse the Hartford Financial Services Group, which will offer most customers a discount of 10 to 15 percent on auto coverage. All Ford, Mercury and Lincoln buyers will get direct-mail pieces, starting in Florida and rolling out to another 10 to 20 states by year end. Ford Motor Credit Co. also will plug Hartford in its monthly statements. Ford plans to add similar programs for upscale brands Jaguar and Volvo, said Jim Moritz, director of insurance operations for Ford Credit.
Bank One Insurance Group will offer insurance quotes to auto finance customers of Banc One Credit Co., a sister subsidiary of Banc One Corp., starting early next year. Customers will get quotes from five different insurance companies, selected by Bank One Insurance. The list of insurance companies to choose from is not final, said Scott Dumbauld, property and casualty product manager for Bank One Insurance.
General Motors Acceptance Corp. Insurance Holdings Inc. has plans to integrate its in-house insurance brands, including low-end Integon, which GMAC acquired in 1997, and go after a larger share of the insurance business. GMAC Insurance expects to offer coverage nationwide for all GM brands, by the end of next year, Kusumi said. GMAC Insurance today has a market share of less than 1 percent - that is, around $1 billion a year in premiums, in a $120 billion market, he said.
BMW Financial Services recently began referring BMW customers to the Chubb Group, which specializes in the upscale insurance market. Chubb also is pitching other kinds of insurance to BMW owners. Hartford has similar designs on Ford customers. The Land Rover brand also will get its own Chubb referral program.
Chrysler Insurance was pretty far advanced with plans for marketing insurance to retail customers, when the DaimlerChrysler merger last year put all plans on hold, Browning said.
Plans at other companies call for direct mail, toll-free customer service lines, dealership brochures and kiosks, Internet links and ads in monthly statements.
However, at least for now, auto lenders are not relying heavily on dealership finance and insurance departments to sell insurance, which seems like the most obvious call of all.
The central problem is this: Only a licensed insurance agent can sell property and casualty auto insurance.
It takes training to get and keep a license. Few car dealers invest the time, effort, money and people to keep a licensed agent or two in the F&I department - especially since employee turnover is high.
Rules vary state by state, which also makes it difficult for automakers to come up with a nationwide program.
Even when dealerships have offered insurance, there is another, basic problem: Most people buying a car already have auto insurance. So the F&I department in the past has tended to attract customers who were dropped by another insurance company or who did not own a car already. By definition, those are high-risk customers.
Lenders say they will urge their dealers to get the necessary license to sell insurance, but they are not counting on it.
'It's a natural product to do at the dealership level,' said Pat O'Brien, director of indirect insurance programs for Bank One Insurance. 'This (referral) approach is working with our credit card customers, and there's not really the affinity for auto insurance there that there is with a dealer.'
Kusumi of GMAC agreed: 'The dealer channel is obviously one we want to exploit, even with all the inherent problems.'
SELLING VS. REFERRING
One way around the licensing problem may be to structure payments to dealers so that they cannot be defined legally as 'selling' insurance per se, if they simply are referring customers to an insurance company.
'How you compensate the dealership and still abide by the (licensing) law - that's a tough one,' Browning said.
Dealers also are motivated to participate, because the insurance programs require original-equipment replacement parts. That steers service business back to the dealership. The Ford-Hartford deal is an example.
It is clear that insurers are eager to get a foot in the door with car buyers. In return for access, insurance companies pay auto lenders a referral fee, and, in a couple of cases, the partners also will share the profits.
The payoff for insurance companies is to sell other forms of insurance to the same customer - more cents per insurance-related dollar, in the same way that automakers are going after more cents per auto-related dollar.
Bank One Insurance's Dum-bauld said people tend to buy other policies, such as homeowners insurance, from the same company that carries their auto insurance. To encourage that, many insurance companies offer a discount for buying multiple lines.
Dumbauld said there is a saying in the insurance industry: 'The largest door in the house is the garage door.'