VW Pioneers Free Insurance

Buy a car, get collision insurance free.

That idea hits the sales stage in a trial run by Volkswagen of America at its 44 Illinois and Wisconsin dealerships.

The concept of connecting dealers with vehicle insurance has been turned into a sales incentive for the first time by VW's “In the Car” initiative.

General Manager Tony Scala of Autobarn Volkswagen, Evanston, IL, estimate the plan is tantamount to a premium saving of $1,300 to $3,000 for the free year's coverage.

From a dealer perspective, “In the Car” appeals mostly to young buyers whose premiums generally are among the highest of any age group.

Under the plan, which is available in addition to any sales incentives offered by Volkswagen of America, buyers or lessees of a new 2004 or 2005 Golf or New Beetle qualify for the free insurance. It's currently for residents of Wisconsin and Illinois only.

VW is paying Nationwide Insurance a flat amount per vehicle for the premiums, but declines to disclose its payments.

The program calls for minimum coverage above the state-required legal limits. That includes liability coverage of $100,000 per person and $300,000 per accident for injuries; $50,000 for property damage; $2,000 per person in medical payments and $500-deductible collision repairs.

For an additional cost beyond the free premium, participants can raise the limits.

In Milwaukee, Concours Motors' VW Sales Manager Pat Packard says the program should prove a sales spur.

VW of America plans to run the program through March 31, then decide if and where to roll it out. No resistance to the idea is anticipated from other states' insurance commissions.

VW dealers are able only to refer customers to a toll-free number connected with agencies of the carriers which in VW's case is Nationwide.

State insurance laws require that auto insurance, because it deals with casualty coverage in an accident, be sold only by licensed brokers. This and other factors have deterred bundling vehicle insurance with other insurance products offered by dealership F&I offices.

Free VW insurance will be furnished to buyers whatever their driving records or credit ratings.

That vehicle insurance fits as an F&I product has long been recognized by lending institutions. The licensing laws act as a barrier, though, since a fairly stiff exam following a preparatory course is required by every state to cover the area of casualty coverage.

The VW experiment, if successful, could pave the way for amendment of state laws to enable auto dealer F&I managers to issue vehicle insurance policies.

VW spokesman Tony Fouladpour says Illinois and Wisconsin were chosen as “guinea pig” states for the free-insurance program because they both have a “business-friendly regulatory climate.”

VW expects dealers able to offer “In the Car” insurance to benefit from body shop or service department work, generated by repairs resulting from accidents.

Although the VW plan excludes Audi and VW's Jetta, Touareg and Phaeton models for the duration of the trial, dealers say they expect these brands to be included in any extension of the program after April 1.