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You will need to replace the electrical portion of the ignition switch:
http://www.fcpgroton.com/product-exec/product_id/9394/nm/1993_1997_Volvo_850_Ignition_Switch/category_id/199
It requires an extra long torx driver to get 2 of the bottom screws out of the clamshell surounding the steering column. Once the plastic is off, very easy to replace the round switch.
At my house, I would take the switch apart and grease it a little and put it back in the car.
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My name is Klaus and I am a V ♂ lv ♂ holic.
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