The general insurance sector will face increasing competition from companies outside the industry as businesses look for new avenues for profit, Hollard Insurance boss Richard Enthoven predicts.
Australia’s general insurance market is dominated by large listed insurers such as Suncorp and Insurance Australia Group. But Mr Enthoven believes non-insurers operating in tough economic conditions will tap the sector for growth.
“Any organisation that knows a lot about their clients and has access to a large customer base . . . has the opportunity to sell insurance to their clients.
“Simplistically, for example, you’ve got Qantas selling travel insurance – there is no reason why Qantas couldn’t sell other insurance products,” he said.
Challenger brand Hollard recently signed a deal with Woolworths to sell car and travel cover for the listed retail giant’s customers.
It follows the introduction of Woolworths-branded life and pet insurance that launched in August last year.
The head of insurance at Woolworths, George Hughes, said the products would help the company “continue in the role of market challenger” at the launch last month.
“Woolies is the big fish – it’s almost like the cornerstone of our distribution strategy, but there are plenty of other organisations that might be looking to additional revenue from their customer bases,” Mr Enthoven said.
Woolworths’ competitor Coles, which is backed by Wesfarmers Insurance, also provides vehicle cover.
Earlier this year, Wesfarmers Insurance said it was looking at bringing its Coles Insurance model to the parent group’s other retail arms, including Bunnings, Kmart, Officeworks and Target.
“You will see more and more non-traditional insurance players entering the market in a distribution capability,” Mr Enthoven predicts.
“Our estimate is that there is about $1 billion of premium savings available if consumers shopped around.”
Whether or not challenger brands will be able to make a meaningful dent in the market share of the big listed insurers remains to be seen. Suncorp and IAG hold a combined 70 per cent share in the personal insurance market, which includes motor and home cover.
It took five years for Hollard, which entered the Australian market in 1999, to amass 10,000 clients, but the company now signs on around 25,000 new customers each month.
A key driver of growth was online sales, Mr Enthoven said. Hollard, which also sells its products through brands such as Real Insurance and RSPCA, uses technology to entice time-poor and cost-conscious customers into its books.
The insurer is rolling out a “build your own” policy for customers looking to tailor their vehicle cover including leaving out or adding extra protection to their policies.
“More than half of our customers are buying their policies online now. It was less than 25 per cent two years ago,” Mr Enthoven said.
But selling insurance online can be a cut-throat business, with some companies pressured to write policies at much smaller profit margins to woo new customers.
IAG, for instance, closed its online business Buzz to new policies for vehicles and homes in June after the group said it was difficult to gain traction in the online market.
“As a new and completely online insurer, Buzz Insurance has faced the challenge of competing in a market which has a range of longer established and bigger brands,” a company spokesman said at the time of Buzz’s closure.