Prepaid debit card lets ‘unbanked’ customers pay auto insurance premiums

Some auto insurance customers who don’t have bank accounts are finding it easier to pay their premiums.

Two auto insurers, The General Automobile Insurance Services Inc. (known as The General) and First Acceptance Corp., have teamed up with NetSpend to offer prepaid debit cards as a method of making insurance payments.

Austin, Texas-based NetSpend offers a debit card — bearing the Visa or MasterCard brand — that’s attractive to “unbanked” customers who typically pay their monthly insurance bills with cash at local insurance offices, says Frank Kaplan, sales vice president at NetSpend. The card is available at roughly 2,400 insurance offices nationwide.

An estimated 60 million Americans are “unbanked,” meaning they don’t have bank accounts. NetSpend’s prepaid cards are targeted at the “unbanked” market.

The General and First Acceptance have agreed to offer NetSpend’s prepaid debit card to their auto insurance customers. The card is designed for people who don’t have bank accounts.

In the insurance business, NetSpend is marketing its card only to auto insurance companies. Aggressive Insurance in Texas is another one of NetSpend’s auto insurance customers.

The NetSpend card is free to consumers. However, once they activate it and load it, they can pay a monthly fee of $5.95 for unlimited transactions. Or they can pay as they go, which runs $1 for a signature transaction and $2 for a PIN transaction. Consumers are charged $2.50 each time they use the prepaid card at an ATM.

When a customer makes a monthly payment at an insurance office, an agent offers a prepaid NetSpend card without any money loaded on it. Money can be added to the card at roughly 110,000 places across the country, such as grocery stores, Kaplan says. The loaded card then can be used to pay insurance premiums.

Aside from making it simpler for customers to pay their auto insurance premiums, the card reduces the amount of cash transactions that insurance offices must handle, Kaplan says. Plus, insurance companies think the card may help retain customers, because they can set up automatic payments through a prepaid card.

“It’s been very exciting to see this program grow. It’s a rare program where the customer wins, the insurance agent wins and the insurance carrier wins,” Kaplan says.

Andrew Martin, senior vice president at The General, declines to comment about the new program. Nashville, Tenn.-based The General has offices only in Louisiana and Ohio but sells policies in all 50 states.

Nashville-based First Acceptance says it decided to offer the debit card because about three-fourths of its 150,000 customers pay their bills monthly at one of the insurance stores. About 40 percent of customers pay by money order because the company doesn’t accept cash payments, says Mike Bodayle, company treasurer. By April 1, 2011, the First Acceptance card will be available at all of its offices in 12 states.

–Lisa Shidler