Disaggregating Aggregators
Hardik Dalal
Joshua Ailwood
Copyright © 2014 Ernst & Young Australia
This presentation has been prepared for the Actuaries Institute 2014 General Insurance Seminar.
The Institute Council wishes it to be understood that opinions put forward herein are not necessarily those of the Institute and the Council is not responsible for those opinions.
Agenda
1. Current state of the market
2. Financial System Inquiry (FSI)
3. Preconditions for aggregators to flourish
4. Conclusion
Aggregators in the market
Financial System Inquiry – Interim Report
Main issues
Recommendations
The options raised in the interim report include: 1. Ensure aggregators are able to use
automated processes to seek quotes from general insurance websites
2. Create comparison categories for insurance products that aggregators could use to
compare the value of different products
DATA
ACCESS
DENIED
• The main issue raised in the interim report
was aggregators’ access, or lack of access to insurers’ data
• Motor and Home & Contents insurers have
FSI – Second Round Submissions
“Suncorp is concerned about any proposal to mandate a commercial relationship between insurance companies and aggregators.”
“QBE is strongly opposed to a mandated policy position requiring general insurers to provide information to aggregators.”
“IAG has chosen not to participate in comparison websites because we believe they are not in the best interests of our customers.”
Major insurer responses
“Allianz has stated there are potential adverse impacts on consumer outcomes from the unrelenting focus on price over qualitative product differences that aggregators generally induce.”
FSI
Aggregators responses
There were no second round submissions from FSI. Compare the market was the only aggregator to make a first round submission.
“The resistance of the insurers contribute to a lack of transparency, reduced competition and difficulty of comparison for the Australian consumer”
• “The Big Guys in Life Insurance, Income Protection Insurance, Health Insurance and
Travel Insurance already display a high level of confidence by openly comparing their products with those of competitors”
FSI – Second Round Submissions
Other stakeholder responses
“APRA notes that compelling insurers to provide their products through
aggregator websites is potentially problematic since there are no barriers to entry for aggregators.”
“The ICA contends that the case for either regulatory intervention to facilitate aggregators’ development or even government ownership of these tools is misplaced.”
“CHOICE is supportive of the ideas put forward in the Interim Paper to facilitate access to insurance data.”
“ASIC considers that there is real potential for comparison websites to supplement mandated disclosure and to help consumers make better financial decisions. “
Preconditions for aggregators to flourish
1. Trustworthiness of the aggregators
2. Increasing online trend of the market
3. Commoditisation of the insurance product
4. Deterioration of insurers’ brand loyalty
1. Trustworthiness of aggregators
Country Independence Transparency perception Customer Insurer perception
Out of the major aggregators, Canstar is the only
aggregator that doesn’t have direct relationships with insurers
Most of the aggregators are transparent about their process for earning fees and their connections to insurers/brokers if there are any It is noted that some
aggregators who were owned by or owned an
insurer/broker had not disclosed their potential conflicts of interest
Concerns were raised about the transparency the products and services, as well as their uses of customers’ personal data Country Consumers are aware of and use aggregators for health insurance, and the awareness of them for general insurance is growing Most consumers are aware of
aggregators and generally place a high level of trust in them
Major insurers are unwilling to participate, while challenger brands view it as an opportunity to gain market share Aggregators are used widely in the UK in motor
2. Increasing online trend
Internet users as a % of the population
Comments
• Similar level of internet take-up across the
four markets and a relatively similar development profile
• However differing attitudes to online
purchase and engaging with aggregators
• The EY Consumer Survey shows there has
been an increase in online purchases, but the actual purchase levels varied
considerably between countries 1993 - 2013
UK
Germany
Australia
2. Increasing online trend
Australia
Global
Survey question: How did you purchase the selected insurance policy?
22% 41% 3% 32% 2% In-person Over the phone Via mail Online Another way 60% 20% 4% 13% 3% In-person Over the phone Via mail
Online Another way
3. Commoditisation of the insurance market
•
In the UK commoditisation of the insurance products have led to the success of
the aggregators, which in turn has contributed to increased levels of
commoditisation in the market
•
From customers’ perception, commoditisation has made it easier for them to
purchase their insurance products by reducing their research and decision
making processes
•
Within Australia, the perceived commoditisation of health insurance products
have led to the success of the aggregators
4. Deterioration of insurers’ brand loyalty
•
In Australia consumers are deemed to be more loyal to their
insurance brands than the UK consumers
•
For private motor and home & contents insurance, the top UK insurer possessed
30% of the market pre-aggregators. For Australia the top 2 general insurers
possess 75% - 80% of the market and the top 2 health insurers possess over 60% of
the market
•
The EY Consumer Survey revealed that in Australia an alarming 89% of the
respondents felt insurers have made “little or no” effort in order to retain them
5. Contribution of aggregators to the market
Stakeholders
Advantages
Customers
Disadvantages
• Increase price competition and
therefore better prices for consumers
• Theoretically aggregators should
offer consumers independent comparison of insurer products
Insurers
• Within the UK lower acquisition
costs for insurers by using aggregators due to reduced advertising expenditures
• New distribution channels for
challenger brands
• Aggregators have been accused
of misleading customers in their adverts
• The use of the “middle man” may
potentially increase prices for consumers
• Customers won’t receive detailed
advice on the product features
• Increasing commoditisation with
too much focus on price
• Erosion of insurers’ market share
in the industry
• Intense price competition
Comparison of different markets
Trust Online trend Commod-itisation Deterioration of brand Contribution to market Country
General
Health
?
?
Is this the last time we need to talk
about aggregators when discussing
the Australian general insurance
industry?
Expectations in the future
-
General Health-
-
-
- - - -
- -
?
-
Trust Online trend Commod-itisation Deterioration of brand Contribution to market Country
Contact Details
Hardik Dalal
+61 2 9248 4476
Joshua Ailwood
+61 2 9248 4649
