Insurer CEO: Wesfarmers and IAG deal means ‘duopoly bulks up’ and customers lose out

Insurer CEO: Wesfarmers and IAG deal means ‘duopoly bulks up’ and customers lose out

Insurer CEO: Wesfarmers and IAG deal means ‘duopoly bulks up’ and customers lose out IAG’s acquisition of Wesfarmers’ underwriting business means the “duopoly has been allowed to bulk up again”, blinding customers to the savings they could make with other companies, says the CEO & MD of challenger brand Budget Direct.

Ram Kangatharan told Insurance Business that the deal was ultimately “negative” for the consumer as the two big players IAG and Suncorp will have 75% of the market share in motor, home and contents across their various brands.

“If you look at the value proposition it delivers to customers in terms of renewal premiums and pricing for existing customers versus new customers, they are effectively making their profits off an existing customer base that does not seem to be aware of the challenger propositions in the marketplace or the savings if they choose to shop around.”

Kangatharan, whose company uses Compare the Market, RateCity and iSelect, noted that the big players avoid using aggregator websites to sell their products because customers will become aware of their “inferior product and inferior price, and because they have so much of the market share they can afford to ignore a developing channel that empowers customers”.

However he believes this will not last long: “As time goes by these strategies will dismantle the market share that that the duopoly has hung on to by continuously consolidating and buying companies to build market share.”

“We are one of the few players to use aggregation but you have to be very competitive to expose your brand.”

His comments came as part of a wider discussion on Budget’s business strategy, which involves boosting its online capabilities to make it more accessible to customers. Innovations will include co-browsing, live chats and voice-activated browsing, most of which will go live in Q2, 2014.

Budget is also developing an online end-to-end insurance solution.
“All insurance companies offer ability to obtain a quote online there are few that other an end-to end capability in terms of administering policies and claims online,” Kangatharan said.

The company has a number of affinity relationships including Virgin Money, GE Money, and Australia Post. In 2013, it added Macquarie Bank and Dodo, providing them with a range of insurance products. Budget expects the affinities business to further grow in 2014.

“2014 is all about consolidation as we work to market the products we introduced in 2013. You will see us start to extend our capabilities and differentiate ourselves from any other insurer in Australia,” Kangatharan added.

*Insurance Business will publish responses from IAG and Suncorp in tomorrow’s newsletter.
 
 
 
6 Comments
  • kevin 18/12/2013 9:59:29 AM
    Budgets comments will undoubtably be challenged by the big two inferior product is a bit misleading
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  • Its a Trust Issue 18/12/2013 10:10:55 AM
    Interesting comments. Looking at Australian Bureau of Statistics - "Online Spending" on domestic retail product (i.e. any product domestically sold online in Australia) accounts for approx 2% of the total domestic retail sold... "Pure Players" - those sellers that effectively do not have shop fronts, account for approx 40% of this figure.
    I would suggest that 'Online Selling' has a long way to go to win the confidence of consumers. Probably more poignant with Insurance, when seen as 'faceless' in an industry that when ranked on trust, is lower than used car sales....
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  • Robert Cooper 18/12/2013 10:59:22 AM
    Fortunately this so called duopoly is in the so called retail space of Householders and Motor but the two big players are well known supporters of the role of the Insurance Broker with their Vero and CGU brands. Thats competition for you. These other small players are already offering business insurance direct too with ridiculous deals. So the competition is coming back the other way too.
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