At around 5-10% of all personal lines sales, the Australian online insurance market is a tiddler compared to those in the US (20%) and the UK (40%). That could be set to change.

Online direct insurers have been making their presence felt of late, with heavy advertising just one sign of the serious approach being taken by insurers.

Australian market newcomer Progressive Direct is the latest to make a splash, rolling out a concerted media campaign in the traditional insurer-dominated market of WA.

“Traditional” insurers IAG and Suncorp have also been active promoting their online propositions The Buzz and Bingle, while other players such as Youi, Real Insurance and Virgin are well on the road to becoming household names – if they aren’t already.

While Progressive has been operating in WA since establishing Australian operations in December, it has only recently upped the ante through investment in TV and radio advertising.

Progressive Direct is a subsidiary of US motor giant Progressive, which controls around $US15 billion ($16.9 billion) in premium.

Its impetus in WA is clear. It considers the West an internet-savvy population where car ownership is high – a demographic which of course is right up the street of motor-focused insurers like Progressive.

Progressive Direct Country Manager Australia Simon Lindsay says the insurer has achieved “steady” progress nationally in its first few months of operation.

“Sale volumes are going at a fairly steady pace, but we don’t want to achieve excessive growth before we’re ready to service that growth,” he told insuranceNEWS.com.au.

Mr Lindsay’s circumspect outlook is typical of an Australian online personal lines market that has been more of a slow burn than an overnight success.

According to industry observers such as Ibisworld finance analyst Zlatan Kapetanovic, conditions are ripe for that growth to accelerate.

“When you consider the Australian consumer demographic is similar to the US and UK there is definitely potential for that market to grow,” he said. “Online insurers typically run at a lower combined ratio and that allows them to offer lower premiums, which is a competitive advantage given premiums are rising due to investment losses and severe weather events.”

Compare such sentiments to the JP Morgan Deloitte 2008 General Insurance Industry Survey, which forecast Australian online players to control only a 9.2% market share of personal lines by 2013.

At the time, the survey noted a conservative outlook from respondents, stating that “the cost advantage inherent in a business model built around the internet is likely to encourage more insurance providers down the internet path”.

And that’s how it is proving to be. “Increased competition” was rated the third-biggest issue for underwriters in the survey undertaken a year later.

“Domestic motor appears to be the most competitive class with a number of new entrants writing business in the last year,” last year’s survey said, adding that online insurers are among the major new players.

Indeed, the growing presence of Bingle and The Buzz are indicative of a channel the traditional insurers are taking seriously.

Last week The Buzz CEO Jacki Johnson told insuranceNEWS.com.au the first year of operation has gone well, which she attributes to giving internet-savvy consumers exactly what they are after.

“People think it’s a good website and think highly of the technology that enables it,” she said last week. “Customers told us they don’t want the Spanish inquisition – they just want something that gives them an accurate price.”

In a mature market, technology indeed appears key to unlocking future growth in the personal lines space.

Developments that go beyond online capability – such as iPhone insurance applications – are now being rolled out by both domestic and foreign insurers in preparation for the new generation of insurance consumer that won’t just consider alternative distribution channels, but will instead expect them.

And if the market leaders are any example, online players are becoming increasingly vocal about their advantages in that area.