Skip to content
23 May 2013
A crackdown by the Australian Securities and Investments Commission (ASIC) on insurance price comparison sites will please insurers but carries an implicit warning to the industry on the growing role of aggregators.
ASIC says it will reallocate resources in light of the growth of the web-based insurance distribution model, to ensure comparison websites provide accurate information – a laudable cause but one that reinforces the growing influence of aggregators in personal lines. It is a phenomenon that does not augur well for IAG and Suncorp.
In the UK, price comparison websites or aggregators have almost singlehandedly commoditised motor insurance. A Financial Services Authority (FSA) report from 2008 found 25% of all motor insurance policies were sold via an aggregator. A report earlier this year by Data Monitor found aggregators in the UK generated up to 6.4 million private motor policies each year.
The move to online aggregation – particularly popular with young people looking for a cheap car insurance alternative with little concern about policy options – has eroded brand loyalty and kept premiums perpetually down, even when market conditions call for a cyclical correction. It’s a market in which IAG, for one, has suffered badly.
Australian insurers are not eager to repeat the UK experience and have threatened legal action against aggregators operating here for offering quotes without their permission. Neither is ASIC keen to see a repeat of the UK experience here, warning in November last year that the success of UK comparators was linked to falling underwriter profits in soft market conditions.
While ASIC says aggregators are growing in number, little information is available on the size of the price comparison market in Australia. RateCity.com.au, which describes itself as Australia’s leading financial comparison website, says it receives about 200,000 unique visitors each month. Its competitor Captain Compare, owned by South African group Auto & General Insurance Company, would only say the number of hits on its website “continues to grow”. Auto & General also operates personal lines insurer Budget Direct.
For their part, RateCity.com.au and Captain Compare have both welcomed ASIC’s renewed interest in comparator sites.
“We are disappointed to see some comparison websites operating in an unlicensed or non-compliant manner,” Ratecity.com.au spokesman Michelle Hutchison told insuranceNEWS.com.au. “It’s great that ASIC is working hard at cracking down on those companies to ensure consumers can rely on the industry to help them save money on their financial products.”
Captain Compare spokesman George Meligonis says regulation in the sector is needed.
“We understand the importance of transparency and that’s reflected on our website and in our financial services guide,” he told insuranceNEWS.com.au.
Both companies say their offer to Suncorp and IAG to join their sites remains open.
Changing distribution models are not the only threat to the profitable business of motor insurance. As more people use online sites – and thus sidestep Suncorp and IAG, which have banned aggregators from quoting their policies – the choice of motor insurers is growing larger by the day.
Merrill Lynch analyst Andrew Kearnan, widely regarded as one of the sharper analysts of the industry, argues the “duopoly-style returns” of the major insurers is under threat by the emergence of so-called “challenger” insurers in the motor space.
He sees more competition affecting profitability at the top end and weakening the grip of Suncorp and IAG, which control 80% of the motor market between them.
“For their part the majors continue to argue that there is no evidence that these ‘challenger’ businesses are having an impact on their capacity to grow in motor and maintain profitability,” Mr Kearnan says.
What can’t be disputed, Mr Kearnan argues, is that challenger brands are growing. They have scale thanks to larger parent companies and have achieved significant inroads into motor in a short space of time.
How a product is sold and who you compete against are fairly crucial components in an insurance sales cycle, and both are now under increasing pressure. Suncorp and IAG have size and economies of scale on their side. It remains to be seen if the local motor market will follow the well-trodden road of the UK, or veer off in a completely different direction.
23 May 2013
We are a young online insurance firm looking to expand our team with an income protection and life insurance specialist.
15 May 2013
Do you have excellent customer service skills, experience in the administration field and have general insurance knowledge? Then we are looking for you!
8 May 2013
Extremely strong aggregating brand I Warm referrals I Manage existing relationships
6 May 2013
Full-time position I Great team environment I Bring your knowledge and skills to a company who values expertise
29 April 2013
An exciting opportunity exists to join Willis at the Sydney practice as an Account Manager, providing risk management and insurance advice to a broad range of insolvency practitioner clients.