General Motors is not an insurance company.
It would appear, that all our troubles are over, finally an alternative option to automobile insurance! As repairers, the landscape has changed, an era of utopian bliss, no more “steering”, no more aftermarket parts, no more denied line items, happy technicians and administration, positive vibes with the customers… break out the champagne… its time to celebrate, or so it may seem on the surface. So, with this, I must stick a pin in your bubble and bring you back down to earth and see the reality of this euphoric scenario. Sorry. Recently I have seen articles and information in various publications and social media sites indicating that General Motors (GM) is now in the insurance business, and with this news, many comments of the sort that reflect the sentiments as expressed in my opening paragraph.
Now last I checked GM was in the car business, mainly manufacturing and selling cars, and a quick check will inform you that they are worth off the top about $140 Billion dollars based on revenue and profits around 2018. Not sure about you, but that would not make me interested in becoming an insurance company. In the same breath, I have not seen State Farm or Intact start building and selling cars. So, I took it upon my self to put aside the ecstasy generating social media comment sections and read into this a bit further.
The climate that has been generated by this announcement is one that our collision industry has been hoping for a noticeably long time. The perception is if GM sells insurance then it will change the repair parameters set out in claims handling. Many believe that if GM is the policy issuer and the policy is on [their] vehicle, then this will open up the door for the use of OEM parts, procedures, and line items that many policies and providers arbitrarily do not account for currently.
Let us look at this, shall we… First off, as disappointing as this may seem, GM does not sell insurance, they also do not hold the policy or create the policy. Right here is where the dreams start to crumble friends. GM is basically a broker or even less an outlet for an insurer to use in an effort to secure a broader market share, rest assured somewhere within the process GM must benefit from this, as it is another profit center for them. Sales, parts, service, and now insurance. So how do I make a profit with minimal investment and minimal risk in insurance? After all, GM is not worth $140 Billion due to luck. Let us get someone who is already in the business and is looking for a fresh way to increase market share, and what a great way to do so. Enter American Family Mutual Insurance Company and their subsidiaries. Now you may think, well they are working with GM and GM is spelling out how they want the policy to look and act on behalf of their client base. Fair enough, and Joe Agent is working with GM on explaining how he wants them to build a car when he is not in the car business. Imagine how this would go over.
This is where the fantasy really fades. The insurer has been in business for decades, and they are aware of the claims process and how it works. Therefore, the use of aftermarket and LKQ parts has a market share = economics. GM is in the car business and understands how that works. What does GM gain from this agreement? Well, it gives them some control on where the vehicle may end up through a preferred repair network, a network that will understand OEM processes, how and when to implement the variations provided, a network that a repairer must meet standards to gain access to. Basically getting the vehicle into the right facility to enhance a customer experience. Maybe a little premium discount for the client. With the GM moniker on the policy paperwork, it lays out a positive, what seems to be, a direct client experience. Let us face it, honestly, GM wants you in a GM product, repaired or replaced.
Realistically speaking, GM is not going to start producing their parts line at a substantially reduced cost to try and match or eliminate competition, it isn’t feasible for them, or worth it, after all, if it doesn’t get fixed, it gets replaced in their view. The insurer is not about to change their methods and processes to accommodate the OEM pricing structure, economically it will not work. We know this already, however, we (as an industry hate to bare the reality) GM builds cars, sells parts, and service. Insurance companies insure risk. GM knows this, ergo: “Insurance policies sold through OnStar Insurance Services Inc. (“OnStar Insurance Services”) are underwritten and issued by member companies of American Family Mutual Insurance Company, S.I. (collectively, “Insurers”). Insurers are not affiliated with OnStar Insurance Services or its affiliates. Insurance policy prices, coverages, features, terms, benefits, exclusions, limitations, and discounts vary among these Insurers and are subject to qualifications. Privacy policies also vary. OnStar Insurance Services, Inc. assumes no responsibility for any claims and makes no representations regarding the terms and conditions of any policies issued by the Insurers. The Insurers are solely responsible for any claims, and coverage is subject to policy terms and conditions”.
This is my opinion, and you are entitled to my opinion. As much as we would love to see all OEM parts, OEM procedures, and all replace, it is not a feasible reality. Sure, there may be some advantages to signing on, however as we have all seen time and time again, new initiatives and offerings tend to blend in with the norm, silently, over time. It is up to the collision industry to do their utmost in repairing any vehicle back to OE spec, equitably and properly. It is up to any insurer to manage risk and indemnify their client with the fiduciary responsibility behind them to put the client back into the pre-loss state, equitably and fairly for all involved. With that said, would you like to discuss the fact that Onstar Insurance Services plans to also write policy for home coverage… I did not know GM built houses as well.
Just sayin’
Feel free to comment and share your perspective on this issue.