Australia Insurance Powers Object to Independent Online Pricing Evaluations

Posted on Apr 29, 2011 by Sergio Ulloa (G+)  | Tags: Australia

Major players in the Australian insurance industry are fighting tooth and nail to halt the rise of price comparison services for customers seeking to better evaluate their coverage options in the country. Two of Australia's predominant insurance companies, Insurance Australia Group (IAG) and Suncorp Insurance, have sent letters to several domestic insurance comparison websites, demanding they remove information and references about their companies' car insurance products and to terminate all links referring back to their brand's websites. The insurers allege such action was necessary because premium comparison web services cannot provide the most accurate pricing data for their brand's products as they don't have the most pertinent coverage information available. IAG and Suncorp have a combined market share of almost 70 percent of Australia's insurance business. The two companies have been undergoing substantial legal efforts to fend off the increased competition that has resulted from the modern surge in choice in retail insurance products and assessment services. The most efficient mechanism by which to do this has been to obstruct the business models of comparison websites. The two insurers have also developed alternative brands to promote alongside those supported by challengers such as Hollard and Auto & General. An internal report issued from global investment bank JP Morgan is being cited as evidence supporting the Australian insurers' concerns about new price comparison modules. The report claims that millions of dollars could be lost in revenues for the country's largest insurance groups if the mechanisms involving price control and evaluation were altered and made arguably more accessible to brokers and consumers. The report condemns the growth of online comparison and prices aggregating services as a significant threat to established insurer's commercial premiums. Enabling customers to focus only on rates could have a debilitating effect on the overall product catalogue, some insurers argue. JP Morgan's research calculated that QBE Insurance, Australia's largest international insurer, could lose up to $414 million in commercial premiums, and that Suncorp and IAG might forgo $378 million and $244 million in revenues respectively. A further $800 million could be lost in home and vehicle premiums, according to the report. JP Morgan concluded that $1.8 billion of commercial and personal insurance premiums would be "at risk" from the alleged "contestable platforms" that allow both brokers and customers to compare and analyze prices of products. According to JP Morgan, Australian insurers should use their current position as leverage to better control the concentrated structure of the market, refusing to license out their services arbitrarily to prevent private comparison websites from gaining a presence amongst consumers. Insurance companies would therefore stop undercutting each other and become involved with price comparison systems run through established brokers rather than anomalous internet services. Operators of online independent insurance evaluation services claim these Australian insurance giants have long tried to prevent their customer-friendly premium rate comparison websites from gaining a foothold in the market. The recent demand for a removal of certain product-lines is an indication that certain insurers remain uncomfortable with online firms estimating their premiums. If these companies do not make their quotes more available on the internet however, ultimately many potential customers will not factor their products into a purchasing decision, online comparison services claim. There is already a problem of underinsurance in Australia, and this development, blocking adequate premium price discovery, would not alleviate that issue. Within the United Kingdom, the comparison industry asserts that it has made a significant impact in reducing premium prices for insurance services across the board for customers, particularly in auto coverage. By providing more readily available information about insurance costs, the UK industry has been forced to innovate and develop more comprehensive services for a customer base's previously unmet needs. Insurers feel that the growth of the price aggregator industry in the United Kingdom is responsible for limiting their margins in the country and would not want a similar development to take place in Australia. Independent internet insurance evaluation services maintain that the industry's paranoia ignores the success and increased customer base that these online assessment services can and have already provided. The diverse access to necessary insurance information will enable both customers and brokers to provide valuable feedback on the further progress of the insurance industry in Australia. Insurance Companies Mentioned IAG Insurance Australia Group (IAG) is the largest general insurer for Australia and New Zealand. The company provides personal and corporate insurance policies under several different brands, including NRMA Insurance, CGU, SGIC, SGIO and Swann Insurance. QBE QBE Insurance Group Limited is one of the top 25 insurers and reinsurers worldwide. Headquartered in Sydney, Australia, QBE operates out of 49 countries around the globe, with a presence in every key insurance market. The Americas Division, headquartered in New York, conducts business through various property and casualty insurance subsidiaries in eight countries. Suncorp Suncorp-Metway Ltd (SUN) is an Australian financial services corporation offering general insurance, banking, and wealth management services. The Suncorp-Metway Group was formed on 1 December 1996. Suncorp's acquisition of Promina has made it the second largest domestic general insurer in Australia and now serves over 3.5 million general insurance customers throughout the country.