GMAC Stops Taking Agent Business In Three States

GMAC Insurance–whose parent, GMAC Financial Services, recently reported a second quarter net loss of $2.5 billion–has stopped using independent agents to write business in three states and cut back activity in a fourth, NU has learned.

While it is no longer accepting any new business through independent agents in three states, the St. Louis-based home and auto insurer said it will still offer policies through its direct channel online and by telephone.

In a limited response to a request for information, GMAC said the action is aimed at helping its bottom line, and that it is “no longer accepting any new business through independent agents in Colorado, Illinois and Michigan.”

In Texas, the company said it will accept new agency business only for commercial vehicle insurance.

GMAC Insurance said the move is part of a focus on “long-term profitability.”

According to the company, the change “will better serve agents and customers with the products they deserve.”

Asked how agents and customers in the affected states were being served if the company was not accepting new business from agents, GMAC Insurance had no response.

The company said it will continue to service existing policies in the affected states.

GMAC's statement said customers can purchase new policies through its direct channel at www.gmacinsurance.com, or by calling 1-800-GMAC-123.

Asked if the halt in taking new agent business would be expanded to other states, GMAC Insurance did not respond.

GMAC Financial Services reported on July 31 that in the second quarter its insurance business recorded net income of $135 million, up slightly from net income of $131 million in the period last year.

It said the results primarily reflected a nonrecurring tax benefit, which offset higher weather-related losses.

The insurance investment portfolio was $7.1 billion on June 30, compared to $7.4 billion as of June 30, 2007. The decrease in the portfolio was attributed to repayment of intercompany loans related to the funding of last year's $340 million purchase of the United Kingdom-based automotive insurance division of Provident Financial Plc.

At the time of the purchase announcement, Ron Judd, GMAC Insurance's senior vice president for international operations, said: “It is a strategic priority at GMAC Insurance to continue to grow and diversify our business both in product lines and geography.”

He said the purchase not only provided entry into the U.K. auto insurance market but, “the potential to also expand throughout Europe.”

In July, GMAC completed a plan to dividend 100 percent of the voting interest in the insurance business to GMAC's shareholders. GMAC continues to hold 100 percent of the economic interest in GMAC Insurance.

The action was taken in the interest of maintaining the company's current financial strength rating, GMAC said. A.M. Best said on July 25 that as a result of the voting interest restructuring, it had affirmed the company's A minus “Excellent” financial strength rating.