Australia’s already highly competitive car insurance market has attracted another operator: American motor insurance giant Progressive Direct.

The US company’s is confident its low-cost, price-competitive online sales/claims model will test the resolve of competitors in the online space and cause some worries for market leaders IAG and Suncorp.

It will also test the boundaries of Australia’s relatively small online market sector.

The Progressive Corporation is among the world’s largest specialist motor insurers. It has more than 28,000 US employees in 450 offices serving 10 million customers, and in 1997 was the first to offer policies online.

Progressive Direct Australia Country Manager Simon Lindsay says there has been a high take-up of online claims in the US, although larger, traumatic or more complicated claims are usually sorted out on the phone. Australian customers will also be offered both options.

Mr Lindsay is a 37-year-old Australian who focused on insurance investment banking for JP Morgan in New York.

He is coy about market share targets, but concedes Progressive Direct’s incursion is likely to be modest in the near to medium term, with research suggesting just 8% of motorists currently buy their policies online.

In the past decade that small but growing chunk of the pie has lured Auto & General’s Budget Direct into the online market, along with Youi and Hollard’s Real Insurance. Suncorp has countered with its Bingle online brand, and IAG with The Buzz.

“The market is competitive in the sense that you’ve got two players that have over 75% of the market, which gives them some advantages,” Mr Lindsay told insuranceNEWS.com.au. “But I think it also means such a concentrated market isn’t necessarily in everybody’s interests, particularly the consumer’s.”

He says the Progressive business model is designed to be profitable with fairly low volume. Its flexibility and cost-effectiveness allow it to be more competitive with price over time.

Suncorp and IAG both told insuranceNEWS.com.au they are well placed to compete, and JP Morgan analyst Siddharth Parameswaran says it will be interesting to see what inroads Progressive Direct and other competitors make.

“Progressive is starting from scratch,” he told insuranceNEWS.com.au. “It has been successful in the US but it’s a different market because business there was largely brokered. It wasn’t sold direct.”