News

Consumer advocates question insurance sales at kiosks

December 19, 2002

DALLAS -- Consumer advocates and some insurance industry executives are questioning 7-Eleven's decision to offer auto insurance via its Vcom kiosks, according to a report in the Dallas Morning News.

(See related stories 7-Eleven hopes to drive Vcom revenues with auto insurance and 7-Eleven's Vcom wins raves at RD)

Les Schlesinger, president of Public Access Insurance, the Dallas-based company that will offer insurance, primarily to high-risk drivers, at kiosks in stores owned by both 7-Eleven and Circle K Co., said his company wants to make insurance "convenient and readily available."

However, D.J. Powers of the Center for Economic Justice, which advocates for low-income insurance consumers, called the kiosks "a disincentive for consumers to shop around." Powers said that insurance is a "big-ticket item" and consumers "should be calling around to get the best price."

Auto insurance rates are determined by a variety of factors, from the driver's age to the number of at-fault accidents. Those factors put customers into three categories: preferred (low-risk drivers), standard (moderate-risk) and nonstandard (high-risk). Companies use different guidelines for placing drivers in the categories.

A male driver 25 to 64 years old, with no at-fault accidents or major traffic convictions, who drives to and from work, would find that rates for a one-year liability policy without collision and comprehensive coverage varied from $429 to $1,223 in Dallas County in August, according to the Texas Department of Insurance.

With such a large fluctuation in rates, consumer advocates said that consumers are taking a big financial risk by not shopping around. And high-risk drivers targeted by the convenience store chains, they said, often don't think they have much of a choice.

"Sometimes people think they are worse off than they are -- they assume that they have terrible credit," said Rob Schneider of Consumers Union, a consumer support group. "If you walk in the wrong door, you are going to get a much higher rate."

Those offering the insurance say they provide a valuable service and plenty of choices.

The policies, available currently at 35 Circle K stores in Arizona and starting next spring at 7-Eleven stores, are offered through Public Access Insurance and Instant Auto Agency, both subsidiaries of Dallas-based Instant Insurance Holdings Inc. Instant Auto sells policies for several insurance companies.

Schlesinger, of Public Access, said his products, which include 30-day and long-term auto policies, appeal to the uninsured and unbanked in Circle K and 7-Eleven's customer base.

Drivers are required to carry car insurance, but one out of five in Texas do not, according to industry experts. Schlesinger said that his service, which allows buyers to pay in cash, will make it easier for those drivers to get insurance.

Currently, 40 percent to 45 percent of Instant Auto's customers pay by cash, money order or wire transfer, he said.

But David VanDelinder, executive director of the Independent Insurance Agents of Texas, whose members could lose business to the kiosks, said the reasoning is flawed.

"The reason why someone is uninsured is not because it is inconvenient to get insurance," he said. "Sometimes it's a choice between putting food on the table and buying insurance."

Here's how the process works: Customers walk up to a kiosk and select an English or Spanish language preference using a touchscreen. They enter basic information such as name, marital status, make and model of car and vehicle identification number. The machine prints out a quote sheet. Customers can take the quote and the phone number and finish the process from home.

Or, if they want insurance on the spot, they will be connected to an Instant Auto agent via a kiosk phone. If all goes well, the customers get temporary cards at the store, and the policies are mailed to their homes.

7-Eleven's kiosk offers ATM, check cashing, wire transfer and money order services all in one, and the retailer plans to begin offering auto insurance in select stores in the second quarter of 2003.

Through kiosks at 35 convenience stores in Phoenix, Circle K sells auto insurance, motorcycle insurance and auto policies for people traveling to Mexico. The company says it's considering expanding the program.