Two of Australia’s most well known brands – Australia Post and Coles – announced last week plans to sell retail insurance products from their thousands of retail outlets.

An Analysis item in insuranceNEWS.com.au in July suggested the success of overseas retail brands moving into the financial services space was a no-brainer proposition for Wesfarmers, which owns Coles and a large insurance arm. The item raised considerable interest among general insurers and even a major retailer, and no wonder.

Last week Coles – with some reluctance – confirmed it was about to start trialling a scheme to sell branded personal lines products, with the underwriting supplied by stablemate Wesfarmers General Insurance.

It’s not a totally new concept. The Waltons retail chain ran a financial services operation until it folded in the 1980s. Myer department stores reportedly also sold insurance products once.

Nevertheless, the Australian personal lines insurance market has developed unique characteristics over the past 20 years, and distribution has been the new marketing battlefield for several years.

But what got the media excited was the announcement that the South African insurer Auto & General will sell insurance products through post offices.

Selling non-mail products isn’t new for Australia Post. It’s an iconic brand, and the sale of simple insurance products could be seen as the logical first step in developing a financial services arm.

According to social analyst David Chalke from Australia Scan, the two sales models are likely to have varying degrees of success.

“Coles is just an extension of a supermarket moving into a range of financial services,” he told insuranceNEWS.com.au. “If they could get it they’d get a pharmacy in there too. They’re trying to maximise their return and become more important to their customers.

“Australia Post is quite different, because it’s not a private company. The post office has a very different role in Australians’ lives than supermarkets. Supermarkets are important but they’re not an institution.”

Mr Chalke says Australia Post’s decision to move into insurance is a natural development for an organisation which has a high degree of community trust.

“Would you trust insurance from the post office? Yeah, of course you would. But what does Coles know about insurance? To the customer, they probably know a fair bit about cheese and potatoes and instant coffee, but not insurance.

“The average punter doesn’t know the product is underwritten by Wesfarmers General Insurance and doesn’t care.”

Nevertheless, Coles’ exposure to a huge number of supermarket customers contains plenty of opportunities for financial services innovation – a prospect that should worry competitors.

Australia Post may have the trust, but people don’t use the post office as regularly as they use supermarkets. And people won’t be buying their insurance from their trusted postal worker – they’ll just be picking up a brochure. The insurance products are only available online or over the phone.

Coles spokesman Jim Cooper makes it clear that the Tasmanian insurance trial is just that – a trial. There are no guarantees.

Australia Post, on the other hand, is very upbeat about its arrangement with Auto & General, and has already announced that travel and home and contents insurance lines will be supplementing its car insurance offering by the end of the year.

Innovation will also become more important as personal lines squeezes into more and more demographic niches, but in the end the increasing commoditisation of personal lines is likely to be a plus for the people who buy the products. Australia Post National Media Manager Alex Twomey told insuranceNEWS.com.au “the winner will be consumers”.

“There’ll be more competition in the market and I think that will be welcome too,” he said.

Perhaps. But the level of competition offered by the new developments isn’t likely to cause any massive change in the local market. Car insurance sold by the UK post office has a market share of about 2%, and sales of home and contents products are about half that.

When you come right down to it, the trend to push the distribution of products down more and more channels isn’t changing the face of insurance at all. It’s being masterminded by insurers who already hold substantial stakes in the personal lines market.