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Next Big Thing in Auto Incentives: No-Charge Insurance

Revolutionary Pilot Provides One Year of Coverage With Lease or Purchase of VWs in Illinois, Wisconsin

BETHPAGE, N.Y., Jan. 3 -- A Long Island insurance think-tank has licensed Volkswagen of America, Inc. to offer the industry's first no- charge insurance policy to customers who purchase or lease selected models during a three-month test in Illinois and Wisconsin.

Unlike traditional rebates or low-interest incentives offered by other automakers, the insurance process has patents pending, ensuring that it will remain exclusive to Volkswagen of America during the pilot. Volkswagen will pay the premiums based on a new insurance model. Creative Innovators Associates, Bethpage, N.Y., devised the insurance plan that bases risk on the car model rather than a driver's profile.

VW will offer the incentive from January 4 to March 31, 2005 on the new 2004 and 2005 Golf, New Beetle and New Beetle Convertible. To qualify, residents of the two states must be licensed in Illinois or Wisconsin and take delivery of a qualifying car from a VW dealer in those states.

The In The Car(TM) incentive changes today's auto marketing focus, aiming the spotlight on customer benefits rather than rebates. The incentive will not diminish the car's trade-in value the way that rebates do.

"Traditional customer cash incentives have the effect of accelerating depreciation; what a consumer gets in an upfront discount is taken away in part at trade-in time," observed Bob Kurilko, vice president for Edmunds.com. "VW's shift to a true added-value strategy-paying for a year's insurance costs -- gives the consumer more realized value without generating the downside of traditional incentive programs."

Unlike zero-percent financing programs, the incentive benefits every customer of the three models. Approximately 70 percent of new-car shoppers do not qualify for zero percent financing, according to Edmunds.com research.

The VW In the Car(TM) insurance policies are underwritten by Nationwide Mutual Fire Insurance Company (Illinois) and Nationwide Property Casualty Insurance Company (Wisconsin)*. Nationwide was asked to participate in this test because of its "On Your Side" commitment to customers and its reputation for quality customer service.

Creative Innovators, an insurance and financial-services think-tank, designed the insurance model and worked closely with Volkswagen of America and Nationwide to develop the program.

The system anticipates a higher-than-normal ratio of younger, higher-risk drivers, but will also be attractive to a wide spectrum of customers.

"The VW In The Car(TM) insurance policies will be valuable to VW customers regardless of age, sex or any other rating measurement used in traditional insurance," said Robert M. Wallach, Creative Innovators managing partner. "The cost of insurance is the second-largest expense in owning a car."

The VW In the Car(TM) policy also contributes to an easy purchasing process. Dealers provide the customer's name, address and driver's license number, and within about five minutes the customer can drive away with an insurance policy. An insurance professional calls within three business days to explain the policy, confirm coverages and provide assistance.

About Creative Innovators Associates

Creative Innovators Associates, LLC, is an intellectual-property company based in Bethpage, New York. Creative Innovators and its subsidiaries including Voluntary Benefits Solutions, LLC create and implement innovative business concepts independently and in partnership or joint venture with other institutions. Its portfolio focuses on the financial-services and automotive industries, as well as employee benefit programs for large companies. Website is http://www.cia123.com/ .

In the Car is a trademark of Creative Innovators Associates, LLC. In The Car(TM) insurance products and services are patent-pending programs offered by Volkswagen under a license from Creative Innovators Associates, LLC.

About Nationwide

Nationwide, based in Columbus, Ohio, is one of the largest diversified insurance and financial services organizations in the world, with more than $148 billion in assets. Nationwide ranks 118th on the Fortune 500 list. The company provides a full range of insurance and financial services including auto, homeowners, life, health, commercial insurance, administrative services, annuities, mutual funds, pensions and long-term savings plans. For more information, visit http://www.nationwide.com/ .

   * Nationwide's participation in the VW In The Car(TM) program extends
     solely to the limited terms of this pilot program.

  About Volkswagen of America

Founded in 1955, Volkswagen of America, Inc. is headquartered in Auburn Hills, Michigan. It is a subsidiary of Volkswagen AG, headquartered in Wolfsburg, Germany.

Volkswagen is one of the world's largest producers of passenger cars and Europe's largest automaker. Volkswagen of America and its affiliates employ approximately 3,000 people in the United States and are responsible for the sale and service of Audi, Bentley and Volkswagen products through retail networks comprising in total more than 900 independent U.S. dealers.