Major insurers battle challenger brands for market share

Major insurers battle challenger brands for market share | Insurance Business Australia

Major insurers battle challenger brands for market share

The traditional major players in the Australian insurance market are slowly losing ground in the profitable home content and motor vehicle sectors, according to new research from Macquarie Wealth Management analysts.

Findings show that Australia’s top five insurers, including Insurance Australia Group (IAG), which sells under popular brands such as CGU, RACV, and NRMA, and rival Suncorp, with a stable that includes AAMI, Apia, GIO, and Vero, saw their market share drop from 85% 15 years ago to about 72% now.

IAG and Suncorp’s control of the market share of the home and motor vehicle sectors, in particular, fell from about 61% in 2009 to 57% this year.

According to the Macquarie report, “the original challenger brands of Youi, Hollard, and Auto + General have grown from no footprint 15 years ago to about 10% of market share,” as it noted that new entrants who are growing market share are “focusing on one distribution channel (or product) and are doing it very well,” The Sydney Morning Herald reported.

The report also suggested that major insurers are distracted from growth by their inability to adapt to new technology and focus on the need of customers who want better online services.

“As incumbents continue to focus inwards, the risk of ongoing market share losses remains heightened, as even more insurers enter the market,” the report said.

Read more: How traditional insurance businesses can stay ahead as the technology pendulum swings

This view, however, was contested by both IAG and Suncorp.

James Orchard, IAG’s general manager for innovation, said the company was aware of how lifestyle trends were transforming how customers consume insurance products and was responding to these trends “by collaborating with innovators both inside and outside our business… to design and deliver new products for the customer of the future.”

Darren O’Connell, Suncorp head of insurance, said the company has “led the industry for innovation, including the introduction of AI technology to make it easier for… customers to lodge their motor and property claims online.”

When it comes to health insurance, Citi analyst Nigel Pittway said major players, including Medibank Private, face disruption risks not just from other insurers but the broader tech start-up market.

“Which by delivering more efficient forms of treatment can elevate the cost as well as increase the frequency of claims,” Pittway said in a note to investors.

Daniel Fogarty, former chief executive of general insurance for Zurich Australia and current head of insurance startup Evari, said the company had successfully targeted a segment in small businesses, particularly tradespeople.

“There are online things as a modern tech company we can do that big insurance players have a challenge doing,” Fogarty told the publication.

Fogarty said that rather than mix technology with traditional insurance-industry models to disrupt the industry, he believed that new insurtech players “are looking to partner with the big brands and to bring technology to them.”

He also noted that while insurance was ripe for disruption, the cost to compete against well-known brands was high.

“For a new player, it’s really a David and Goliath story because these big insurers are some of the biggest companies in the country," Fogarty told SMH. “Australians love their brands. we are the land of the oligopoly, so to get another brand in the psyche of the Australian mindset is very expensive from a marketing point of view.”

This view is reflected in an EY report which found that 72% of insurtech companies collaborate with an industry incumbent.

Fogarty said new players are not yet taking enough market share to truly disrupt the big players.

“But I think that is coming and I know the big players are all watching the small players with great interest,” Fogarty said.

Rita Yates, head of Insurtech Australia, said changing consumer attitudes were driving the rise of smaller players, with consumers now expecting “everything to be mobile, instant, and don’t necessarily want to speak to people over the phone,” SMH reported.