Can being an OnStar subscriber potentially save you money on car insurance? If General Motors has its way, the answer to that particular question soon might be yes. Anxious to give its current owners a reason to re-up their OnStar subscriptions at the end of the term, as well as attract new car buyers to its fleet of OnStar-equipped vehicles, GM is working with insurance industry heavyweights in order to introduce this money-saving incentive.
According to an article in the Detroit Free Press, GM is touting the safety benefits that OnStar introduces as a carrot for luring several insurance companies into a partnership with the automaker that could see discounted rates applied to drivers with an active OnStar subscription. Some of the players involved include Liberty Mutual, Century 21 and State Farm. In fact, State Farm has already agreed to an experimental initiative in Ohio where it has been offering lower rates to OnStar subscribers since 2009 - a program it will expand to California residents by the end of 2010.
General Motors has aggressively marketed the fact that OnStar allows it to track the location of stolen vehicles and the fact that OnStar users generally have a lower risk profile when it comes to insurance claims in order to help it line up potential suitors for insurance discounts. The service additionally provides valuable information regarding conditions surrounding airbag deployment and other types of emergency situations on the road - data that is very much of interest to the insurance industry. Upcoming technology from OnStar that will potentially allow parents to track the location and document the actions of their teenage drivers behind the wheel is also being touted as a further avenue towards negotiating even lower policy rates.
Currently, approximately 50 percent of Chevrolet, Buick, GMC and Cadillac owners renew the free OnStar subscriptions that come with the initial purchase of their vehicles, and a little more than half of those renew for a second time at the end of that additional term. GM has been looking for ways to add value to the OnStar suite of services in the face of free, non-subscription based offerings like Ford SYNC, which can be installed as an option with no recurring fees. Compared to the $199 to $299 annual charge for OnStar service, SYNC has become an appealing alternative that has boosted the technological prestige of one of GM's biggest competitors.
There is no question that the promise of a lower insurance rate would serve as an appealing incentive to help draw more new car buyers into General Motors showrooms. That being said; there are a few hurdles that must be cleared before making any judgments as to the value of this particular insurance rebate plan. Each state in America operates under its own specific insurance regulations, which means that GM will be required to negotiate with 48 additional bureaucracies prior to being able to offer this program across the entire country. Adding to this complexity are the bevy of different insurance companies that do business in various geographical regions, each of which will have to be dealt with on an individual basis by General Motors.
New car buyers must also take into account the value of the insurance discount versus the cost of the OnStar subscription. While the rebate will be essentially 'free'? during the initial ownership period while the automaker picks up the tab for the OnStar service itself, once it comes time to renew drivers will be need to determine whether the $199 to $299 subscription fee balances out the reduction in their insurance policy rate. The risk profiles of each individual driver applying for the rebate will also play a large role in determining whether it makes sense for owners to remain OnStar subscribers.
There is no question that GM faces a complicated road ahead when it comes to implementing and then promoting an OnStar insurance rate discount. However, this appealing incentive could become a valuable tool when selling OnStar-equipped vehicles faced with the mounting competition from free telematics and connectivity systems offered by rival brands.