Insurance agents attack GM sales gimmick; tax won't shoo Boeing from Illinois; credit unions' win over banks

Just days after General Motors revved up a sales gimmick offering a year's worth of free auto insurance on new cars and trucks in Washington and Oregon, insurance agents want to slam on the brakes.

The sales incentive, launched July 6 for a two-month test, covers sales or leases of Chevrolet, Buick, GMC and Cadillac cars. It could be expanded to other states if it helps move enough vehicles off the lot.

But independent insurance agents, already under siege from online brokers, see the pilot program as another attack on their wallets and hint darkly that it must be violating some rules.

"Our concern: Insurance is not a commodity like floor mats," declared PIA Western Alliance, a trade group of independent agents and companies in nine Western states. "Worse, the program is an incentive that takes income away from independent insurance agents."

GM says the policy, from MetLife Auto & Home, covers liability and physical damage at levels above the minimum requirements in both states, and it has a kicker: If the car is totaled within the first year or 15,000 miles, a "vehicle buyback" clause will replace it with a new one without deducting for depreciation, the company says.

The automaker, battling back from its bout with bankruptcy, says this is the first time any U.S. car company has made such an offer across its full line of vehicles.

It picked Washington and Oregon for the test run because "traditionally they have not been great markets for us, so we see opportunity there," says GM spokesman Tom Henderson in Detroit. "We want to get on people's consideration radar."

It's too early for any hard data, he says, but "the early indication is consumers are reacting favorably, and we're having very few people decline."

The independent insurance agents, however, are not happy.

Calling the program "disturbing," the regional PIA group issued a statement questioning whether consumers will get the best insurance advice on the showroom floor.

It suggested that the program goes against state insurance regulations that forbid providing rebates or gifts for buying a policy, calling the incentive "a violation, at least in spirit, of the insurance regulations of many states."

The state Office of the Insurance Commissioner, however, says GM's deal is legitimate.

"It's legal," says spokeswoman Stephanie Marquis. "It's definitely innovative, but there was nothing in state law that prevented it from being approved."

She says insurance agents are forbidden from offering incentives to policy buyers. But as GM has structured its program, the company buys a group policy from MetLife, and then enrolls members in the covered group.

PIA claims GM has received regulatory approval to offer the deal in 17 states. Henderson says he can't say yet whether GM will roll the program out elsewhere.

Maybe the independent agents can fight back by encroaching on the auto dealerships' turf — say, offering to sell insurance policies with extra undercoating for $299.

Tax won't shoo

Boeing from Illinois

Don't expect Boeing, which moved its headquarters to Chicago a decade ago, to join the corporate chorus of complaint about Illinois' higher business taxes.

Six months ago, lawmakers in the Land of Liabilities — er, Lincoln — raised the state corporate income-tax rate from 4.8 to 7 percent, as part of an effort to plug the state's gaping budget hole.

Now, several of Illinois' mainstay companies — from Caterpillar, Sears and the parent of the Chicago Mercantile Exchange to Jimmy John's Gourmet Sandwiches — are making noises about leaving the state if legislators don't find another way to raise revenue.

But Boeing says the tax increase won't affect the company much at all.

Boeing spokesman Chaz Bickers says that's because Illinois bases a corporation's income-tax bill on its sales within the state. Boeing, he says, sells few if any airplanes in Illinois; most commercial-jet sales, for instance, are recorded in Washington, where the company pays business-and-occupation (B&O) tax rather than income tax.

"We don't have much taxable revenue in Illinois, so this is not generally a big concern for us," Bickers says.

— Drew DeSilver, ddesilver@seattletimes.com

Credit unions notch

a win over banks

Washington credit unions can now take deposits of up to $100,000 from state agencies and local governments, marking a legislative victory for the nonprofit financial institutions over their rivals in banking.

A new law that took effect July 1 authorizes counties, cities, schools and other types of taxing districts to put up to $100,000 in public funds in state-chartered credit unions. Before that, only banks and thrifts could hold the cash, says Troy Stang, president of the Northwest Credit Union Association, which lobbied for the change.

The trade group, which represents about 200 credit unions in Washington and Oregon, aims to lift that deposit cap in the next legislative session. There's no limit on how much federal agencies can deposit in a credit union, nor does Oregon limit the amount, according to the association.

Banks have taken notice of the credit unions' expansion.

Jim Pishue, president of the Washington Bankers Association, says credit unions have grown beyond their Depression-era roots of serving people of modest means with savings accounts and personal loans, and some now have billions in assets.

"The big institutions are competing on a direct basis with banks, but they have this huge advantage of not having to pay state or federal taxes," Pishue says.

Thrifts used to be tax-exempt, but when they began behaving and looking more like banks, Congress took away their tax-exempt status. "I think credit unions have come to that point," he says.

Stang responds that banks have raised the argument in the past and lost. Credit unions may add more products that compete with banks, but they still approach things as nonprofits do, he says.

"I would invite any for-profit banker to convert their for-profit institution to a not-for-profit credit union where the boards of directors are volunteers, not stockholding individuals that reap the benefits and the profits of the organization," he says.

While the bankers association is wary of the growing size of some Washington credit unions, banks still control the lion's share of deposits. State-based credit unions had 19.3 percent of deposits in the state as of June 30, 2010, up from 18 percent a year earlier, said Linda Jekel, director of credit unions for the state Department of Financial Institutions.

— Sanjay Bhatt, sbhatt@seattletimes.com

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