Insurance markets in everything

by on March 8, 2009 at 2:07 pm in Economics | Permalink

Hyundai is gaining market share:

Besides the Genesis, Hyundai is also benefiting from a novel scheme,
launched in January, in which it offers to buy back cars from customers
who lose their jobs within a year of their purchase. (The company
essentially offers a smaller discount and then uses the money to buy an
insurance policy.) This has proved so successful in stimulating sales
that General Motors said on March 3rd that it was considering a similar
scheme.

John Pertz March 8, 2009 at 2:20 pm

Of course GM isnt the original innovator. Sorry, I just couldnt resist. GM is kind of like that slow kid who is always a few steps behind. We all know that our support will never help GM gain a lead in the race but at least with our support the special kid can feel better about himself.

MW March 8, 2009 at 3:32 pm

There is some parallel to the economy in general here. People basically have the money to lend/consume, but have so much uncertainty about the economy and worst-case scenarios. The uncertainty then makes these scenarios all the more likely. Take away the relatively remote possibility of losing their job and they are willing to consume somewhat like before.

How we do that on a wider scale than cars, I haven’t a clue. Applying a wider guarantee to new debt of bank-holding companies seems like a good idea, provided regulation makes default less likely in the future. However, the implementation of such an idea would be fraught with difficulty.

Sean Brown March 8, 2009 at 4:23 pm

@MW – more comprehensive unemployment insurance? To me, it’s better to let firms go bankrupt and fortify personal balance sheets instead.

dearieme March 8, 2009 at 6:11 pm

How can they be confident that the insurer will survive? I know, they take out insurance against the risk of its collapse.

Ricardo March 9, 2009 at 1:35 am

So, you wouldn’t be able to get insurance like this directly, because of your bad credit.

You wouldn’t be able to get insurance like this directly because no insurance company has any idea what to do with a lot full of year-old Hyundais. And as an individual selling your car, you won’t be able to get anywhere near the price that a Hyundai dealership will for the car. I think it is an economies of scale story rather than a let’s-repackage-and-sell-risk-to-some-other-sucker story.

You have to admit, it’s no crazier than the idea of group health insurance offered through your employer.

Dwight from cleveland March 10, 2009 at 7:25 am

Lol, I got a better idea for GM. They offer a basic economics class with every purchase. It would go something like this.

“Alright you are going to buy this asset. As soon as you leave the lot it will depreciate between 10 and 20%. Now we have extended the loan period just beyond the low maintenance life expectancy of the car and most of its parts. For you there is no advantage at all. That simply allows us to make the care available to people who in the past were ‘willing’ but not ‘able’ to buy our product. This allowed us to raise the price on the product of course. Now, you are going to have to be confident that over the next 6 years that you are going to remain employed and healthy. We recommend that you get briefings from your employer about his or her business plan and voice any concerns that you might have about the future of your company. Alright, are you ready to sign?†

While this approach might not bring in as many customers, the banks would be more then likely to give loans to the ones that did.

Don F March 11, 2009 at 10:43 am

I agree with the Hyundai approach to attract customers with the buy back program. It gives the customers guarantee and security in their purchase of a vehicle. In these bad economic condition it is good for customers to start spending money to help build the economy back up again. The customers will feel more confident in their life situation.
Hynduai should be commended with their innovative and creative approach to attract customers.

jloomp December 10, 2010 at 10:29 am

I don’t see the point of some types of insurance today, in some countries… The most useful in my opinion is the home insurance. Your house is something personal, where you grow, where you and your family spend time together… and nothing must happen to that…

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