A Canadian company is introducing to U.S. dealerships an insurance product aimed at customers who owe more on their vehicles than they are worth.
The product, called Walkaway, pays as much as $15,000 toward the balance of a vehicle loan or early termination charges on a lease. The protection covers negative equity - the difference between a vehicle's wholesale value and its loan balance or lease charges.
Walkaway coverage is added to an installment sales contract or lease agreement. It addresses the debt of customers who must return their vehicles to a dealership because of a personal emergency.
The product's marketer, iNet-Fi Inc. of Toronto, has an exclusive licensing agreement with EFG Cos. of Irving, Texas. EFG supplies U.S. dealerships with service contracts and other insurance products.
Walkaway offers dealers "new opportunities for revenue growth," says Thomas Larkin, CEO of EFG. Several hundred U.S. dealers have shown interest in the product, which will be offered April 1, iNet-Fi says.
Since iNet-Fi introduced Walkaway in 2000, the company says it has sold hundreds of thousands of policies through nearly 100 dealerships in Canada. The company has paid off more than $12 million Canadian in vehicle debt, it says. Gross premium volume for Walkaway products exceeded $5 million Canadian last year.
U.S. Walkaway packages typically will retail for $199 to $689. They cover circumstances such as a customer's death, critical illness, disability, job loss, international transfer, loss of driver's license and personal bankruptcy.
A premium version covers 90 days of loan or lease payments in the event of disability, job loss and unpaid family leave. The policy enables the customer to keep the vehicle during that period.
Dealers who sell Walkaway pay $55 a customer to provide one year of complimentary insurance coverage.
Dealers earn commissions of 50 percent to 60 percent on upgraded coverage. In Canada, 52 percent of consumers who get the initial one-year policy also purchase extra coverage, iNet-Fi says.