Motors Insurance Corp., a subsidiary of General Motors Acceptance Corp., wants to sell more of its products to non-GM dealers. Those products include extended service contracts, Guaranteed Asset Protection coverage and health insurance for dealership employees.
On Feb. 1, Tom Callahan became Motors Insurance Corp.'s executive vice president for dealer products and services. MIC, of Southfield, Mich., had $2.72 billion in revenue last year, about the same as in 2004.
Callahan, 53, formerly was MIC's senior vice president for claims and for the GM Protection Plan. He spoke with Staff Reporter Gail Kachadourian.
What responsibilities does your new role include?
Previously, the majority of my focus was on service contracts in the U.S. sold through the GM dealer network. With the change, I also have responsibility for all the service contract business that is handled out of Canada, as well as service contracts sold through one of our subsidiaries, Universal Warranty Corp. They market through independent insurance agents directly to dealers.
I also have responsibility for a program we set up a few years ago called TIPS, Total Insurance Products and Services. We sell a full range of products to dealerships from GAP (Guaranteed Asset Protection) insurance to tire and wheel coverage to health insurance to dealers to employee benefit programs to dealerships.
I also will have responsibility, along with another gentleman, for the inventory (floorplan) insurance programs, based out of Mount Laurel, N.J.
How much of GMAC's annual revenue does MIC represent?
Last year, our revenue was about $4.2 billion for all of GMAC Insurance (Holdings). In 2005, the MIC business (revenue) was $2.72 billion (of that $4.2 billion).
What are your top three products in the United States?
Service contracts are probably our biggest product. Wholesale (floorplan) insurance. One that's up and coming right now may be our Guaranteed Asset Protection insurance. We've just been in it for a couple of years. We're starting to see some pretty good growth.
How many service contracts does MIC sell annually?
In a typical year, we write approximately 1.2 million service and maintenance contracts.
What is MIC's market share for the GM Protection Plan on vehicles sold in the United States through GM dealers?
In the last five or six years, our penetration has grown a little bit over 50 percent. The last estimate we saw from J.D. Power is that about 27 to 28 percent of all GM vehicles have a service contract. We have about 19 of those 27 or 28 points as a market share.
This is on new vehicles, which is the primary thing we track. That includes GM Protection Plan and Saturn Service Plan, a privately labeled program for Saturn.
What types of incentives do you offer dealers to sell service contracts?
We have a dealer bonus, anywhere from $25 to $85 per contract. It escalates depending on the penetration level of that dealership. We also provide a $10 per-contract incentive that goes directly back to the dealer to use to incentivize their F&I people.
We also offer some travel incentives, where (dealers) can win one of several trips. Locally, GMAC offices may have individual contests they run.
Do non-GM dealers sell your products? How much of your business is that?
We've got Universal Warranty Corp., based in Omaha, which is one of MIC's subsidiaries. They'll probably write over 100,000 service contracts this year. About two-thirds of that business comes from non-GM dealers.
GM Protection Plan business - the vast majority of our business comes from GM dealers. We do get some business from non-GM dealerships that are affiliated with some of our GM dealers. But for the most part, we would not have a stand-alone store from another manufacturer who would write under the GM Protection Plan today.
Our TIPS program, we have been developing that under the GM network. We have not expanded that outside the GM network. Our (floorplan) business, we do have non-GM dealers.
Do you want to increase your non-GM dealer business?
Yes. It's one of the things we think is very important for growth. We've begun some internal studies for us to figure out the best way to approach that.
How are your sales of health insurance to dealers for their employees?
We've had some success. It has not grown as quickly as we originally hoped. It's an opportunity moving forward.
How does an increase in leasing affect your service contract sales?
If a customer is leasing a vehicle, and the term of the lease is less than 36 months or 36,000 miles, they really have zero propensity to purchase a service contract because the underlying warranty on the vehicle is going to take care of any failures on the car.
That has moderated some of our growth, but we still feel very favorable about our prospects for growth in the service contract business.
What are MIC's challenges?
The competition is very fierce. That's our biggest challenge.
There has been a lot of discussion about manufacturers moving to hybrids and new technologies. That poses a challenge to us. If a hybrid vehicle is being introduced, we need to understand how that technology is going to perform, what the expected failure (rate) is of that technology, and how much it costs to repair that failure. Our challenge is to understand that and to be able to price the service contract.
You may e-mail Gail Kachadourian at [email protected]