Insurers shun online scrutiny
A war of words has deepened in the insurance industry over comparison websites which allow people to easily shop around and compare prices for house, contents and car cover.
Last week, the Sunday Star-Times reported that, in a submission to the Commerce Commission, giant Australian insurer Suncorp (which owns Vero and AA Insurance), accused rival giant Australian insurer IAG (which owns State, AMI, and NZI), of refusing to provide pricing data to price comparison websites.
Common in the UK, these sites have led to people shopping around, fierce competition and cuts to insurers' margins.
New Zealand has plenty of sites where people can compare and buy life insurance, but none covers general insurance like house, contents and car cover.
Suncorp's claims emerged because IAG had said price comparison could evolve here to provide competition, something it hoped would help persuade the Commerce Commission to let it take over Lumley and give it a 66 per cent share of the general insurance market.
Now Roger Bell, a former chief executive of Suncorp-owned Vero, claims Suncorp is among insurers refusing to provide pricing information to a comparison website he is trying to launch.
Bell is trying to set up iCompare with British expat Richard Conway from Pure SEO, a search engine optimisation firm, who fixed on the plan after seeing a gap in the market when he came here five years ago.
"The major players are very reluctant," Bell said. "They don't want to see their prices and terms and conditions listed where consumers can make comparisons."
So far none of the local insurers had signed up, despite all being asked. Because of that, Bell said he was "astounded" when he learned Suncorp was blowing the whistle on IAG's alleged refusal to play ball on comparison websites.
To date only overseas insurers had agreed to provide information to iCompare, Bell said, as they saw the website as a potential way to make sales into New Zealand without spending a lot.
Bell and Conway wouldn't name these insurers but Australian comparison websites carry cover from the likes of global group Virgin Money, as well as local Australian insurers, who have no presence here.
"We think the New Zealand insurers are making a mistake here because these overseas players are big, and very experienced in moving into new markets," Bell said. "We will be approaching them again, and indicating that we intend to publish the names of the insurers who don't provide their terms to the aggregation sites. We would think they'd want to avoid that."
A recent Colmar Brunton survey found three-quarters of people would like to be able to buy general insurance policies online.
Tim Grafton, the chief executive of the Insurance Council of New Zealand, said it would be cautious about comparison websites because of the danger of people focusing "solely on price and on the cover they are getting".
Suncorp company Vero said it felt similarly. "Vero is an intermediated insurer. That means we sell our products through brokers and other business partners.
"Vero ensures our brokers and other business partners have all the information they need regarding prices and conditions for the needs of the customers they represent. We do not believe price comparison sites can match that service."
It said: "Comparison sites focus on premium price. That is just one factor a customer needs to take into account when deciding what insurance cover meets their needs. Customers can choose a variety of premium cost and excess options. They can also choose to vary cover depending on changes in the value of the asset they are protecting. That is the key reason general insurers in Australia and New Zealand have not supported comparison sites."
Suzanne Wolton from Suncorp company AA Insurance, said it could not see what a price-comparison website would add, though she didn't entirely rule out participating in one.
"Our participation would depend on a number of things, such as the type of business model the site is proposing, consumer demand, and competitor activity. Above all though, the model cannot simply be all about price. We've learned some lessons since Canterbury that, although price is important, there is a lot more to consider . . . such as financial strength, claims service and ensuring that you have right cover in place for your individual needs."
In a statement, IAG said it did not believe price-comparison sites gave customers enough information to make an informed decision. "They invariably fail to provide adequate insights on other key features that are important . . . such as the scope of insurance cover or claims and service experience - areas that we invest heavily in though our direct insurance brands, and where brokers also play a valued role."
IAG said price-only sites can led to a "race to mediocrity" where policies are stripped of benefits in order to rate more highly, potentially exposing customers to greater risk of loss, rather than policies being based on a combination of benefits that could better meet a customer's actual needs.
But Bell and Conway said iCompare was designed to put information before consumers so they could make informed choices.
Conway said insurers might face a backlash when their reluctance to engage with such a website becomes apparent to customers. "New Zealand insurers often claim to champion consumer choice, but they are hesitant about participating in a forum that will offer exactly that. At a time when other monopolies are under public scrutiny, this doesn't seem wise to us."
- Sunday Star Times