Large insurance companies could find that they end up being the “biggest losers” following the growing success of online aggregators in Australia and abroad, with smaller players benefitting from an increased trend towards price-based competition.
A report from Timetric - an analyst firm providing online data, analysis and advisory services - notes that the online aggregator market has established footholds in key markets such as Australia, the US, Canada, Hong Kong, Singapore and India, which suggests rapid growth in the underdeveloped online insurance industry is imminent.
“The biggest losers in the success of online aggregators are large insurance companies that suddenly find themselves at risk,” the report states.
It adds that companies with well–known brands are now competing directly with smaller and often previously unknown insurers purely on price, which has markedly increased competition.
“Brand dilution and falling rates of customer retention, market share and profitability are the key challenges facing leading insurers,” it adds. “Smaller insurers, however, have benefitted greatly from the increased price-based competition and ability to access a wide customer base without having to pay large amounts for marketing and advertising.”
Insurance analyst at Timetric, Ben Carey-Evans said: “The question for insurers is whether to take on the online aggregators or embrace them. They can join them and take advantage of the large quantity of potential customers, or they can improve their innovation, branding, customer relations and technological strategies to compete with them.”
Aggregators are set to also face challenges: “The main issue is the ease at which customers can manipulate the market via online quote generation – posting fake prices below the bottom quoted price to drive all of the other prices down,” said Carey-Evans.