General Motors (NYSE:GM) has a long and storied history. The company has plenty of lessons from the past that it can draw on to generate additional business. Now, GM is using its treasure trove of customer data to resurrect a defunct business.
On this episode of Fool Live that aired on Nov. 18, "The Wrap" host Jason Hall and Fool.com contributor Danny Vena discuss what GM is doing and why it makes a lot of sense for the automaker.
Jason Hall: Danny, this is interesting. What's old is new again, General Motors is making some moves. What's going on here?
Danny Vena: I saw story today and I did something of a double-take because I thought, wait a minute, this is dejavu all over again. The famous Yogi Berra quote. But General Motors has decided they're going to launch a car insurance business using data from its OnStar system. Now you may not know that for General Motors cars that are sold in the United States the OnStar system is installed by default. Whether or not, I think most customers get a free 12-months subscription to the OnStar service.
But what they're doing now with the OnStar system is essentially a big onboard computer that monitors all the things that are happening with that vehicle. GM has found a way where they're going to tap into all of this data, and they're going to use that data to quote people car insurance. If you are a person that accelerates quickly off of that red light, or if you're a habitual speeder, your OnStar system knows that. You're not going to get as good of a car rate.
Jason Hall: For the record General Motors will not be offering the low rate on auto insurance. [LAUGHTER]
Danny Vena: Way to be honest there, Jason. [LAUGHTER] On the other hand, for people who have good driving habits, people who are generally more out for a Sunday drive, who are more cautious in their driving habits, this is going to turn into, they'll be able to offer them much lower rates. You're more of a car guy than I am so I don't know how many GM cars are out there on the road.
But if you think about how many cars are out there that have that GM OnStar system, they're dealing with a captive audience. So they can go right to those customers and say, "Hey, you know, we'll be able to offer you better rates based on your driving habits," and they're going to have a lot of takers for that.
You may recall that GM offered their customers insurance back prior to the Great Recession in 2009 when they sold off their GMAC financial services business, which eventually became Ally Bank (NYSE:ALLY). They haven't been in the insurance game since then, but the fact that they're getting back into car insurance, and the fact that they're doing it based on data -- quantifiable data that they already have, I think is a very smart move for GM.
Jason Hall: That's the key. This is a great example of the data economy and leveraging that data in some way to make money or improve your business so that's awesome, that's fun.
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December 19, 2020 at 11:00PM
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