Skip to content

Brought to you by:
Email Print

The return of comparative hysteria

“Protect Aussies against ludicrous insurance fees with price comparison site,” screams a petition on the Change.org website.

The call, written by News Corp journalist John Rolfe, urges Financial Services Minister Kelly O’Dwyer to set up a national, government-run comparison website for home and motor insurance.

As reported by insuranceNEWS.com.au last week, the proposal is backed by independent senator Nick Xenophon, who plans to move a resolution to examine establishing such a scheme.

“[It] would drive competition, choice, and the flow-on savings it would deliver to consumers make it a no-brainer,” Senator Xenophon says.

Of course, it’s no coincidence News Corp recently launched its latest home and motor insurance campaign with “consumer champion” One Big Switch, which aims to negotiate a mass discount for the thousands of readers it hopes will sign up.

And the sound bites just keep coming.

“Lack of price transparency in home and car insurance is seeing rates soar eight times faster than wages,” Mr Rolfe writes.

One Big Switch says: “The average home building insurance premium has increased by more than 38% in four years.”

But would the proposed comparison site and pending mega-discount be the victory for people power that is suggested?

There are other interests at play.

Of course, One Big Switch and its “partners”, News Corp and Seven West Media, which have been providing coverage aplenty, will gain a commission from the sales.

And remember, it hasn’t always played by the rules. insuranceNEWS.com.au was the first to reveal in 2014 that One Big Switch was operating without an Australian financial services licence.

It was also putting forward some highly questionable assertions about the level of discount achieved. (See earlier story)

In June last year the Australian Securities and Investments Commission (ASIC) confirmed One Big Switch had been operating without an appropriate licence.

The company’s application was approved, but only on the condition that further compliance reviews took place.

The insurance industry is united in its belief that neither the mass switch nor the comparator website can do anything but harm consumers. This is because price cannot be the only basis on which insurance is purchased – not if you want your claim to be paid.

“Even in motor there are vast differences between policies,” LMI Group MD Allan Manning told insuranceNEWS.com.au.

“Insurance is not just about price but protection. [A government-run comparator] goes against everything I believe in.

“As for One Big Switch, it’s like trying to buy insurance the same way you buy washing machines. It’s not like that. You’re going to bundle together people who have completely different circumstances.

“I don’t think it’s the right model.”

National Insurance Brokers Association CEO Dallas Booth agrees.

“We have very deep reservations about comparator sites and One Big Switch is a massive concern,” he told insuranceNEWS.com.au.

“Anything that focuses on price and only price provides a massive disservice to the community.”

There are wide variations in prices and policies, and it is not easy for consumers to work through.

Mr Booth accepts a comparison website that includes information such as policy features and claims experience, as well as price, would be hard to argue against.

However, he says this would be a massive undertaking and has no precedent.

“By and large, comparator sites don’t do that. It is important to shop around. If people are confident to do that on their own, then so be it. Otherwise, we recommend a broker.”

A more realistic reform would be to make the product disclosure statement more accessible to consumers, he says.

The Insurance Council of Australia (ICA) disputes the News Corp version of events on insurance price rises.

“Home building insurance premiums have been static for more than two years and contents insurance premiums have actually fallen over the past three years,” CEO Rob Whelan said. “Motor insurance premiums have barely moved in the past four years.

“If governments and politicians wish to reduce the cost of insurance, the fastest way to slash prices would be to put pressure on state and territory governments to ditch stamp duties on insurance policies, which typically add about 10% to the final cost.”

As for One Big Switch, ICA says it supports competition “provided that offers to consumers are fully compliant with the law in terms of consumer disclosure and advice”.

“ICA notes some recent news articles promoting a churn campaign have failed to disclose that the publisher earns commissions from customers who change insurance policies through the scheme,” spokesman Campbell Fuller told insuranceNEWS.com.au.

And as for Mr Rolfe’s petition, at last count it had been backed by a rather unimpressive 551 people.

Brought to you by: