An industry body has maintained its stance against the introduction of comparison sites in New Zealand, despite some potential solutions being raised by the Financial System Inquiry panel in Australia this week.
As in New Zealand, where iCompare has failed to get off the ground, the biggest insurance companies, including
IAG and
Vero (
Suncorp Group) won’t allow their product information to be released to aggregators, slowing their growth across the Tasman.
The panel had suggested one option was to ensure aggregators can use automated processes to obtain quotes from general insurance websites. It noted this “would not give aggregators access to direct pricing models but may provide a route to discover them”.
Another option suggested was to develop representative consumer categories based on key consumer characteristics: “Insurers could disclose their policy premia for each category and consumers could then, potentially with the assistance of aggregator services, compare premiums from different insurers for the category that best represents their characteristics.”
The panel noted that just enough categories would be needed to ensure that the majority of consumers fall within a category. Too many categories could create complexity for consumers and compliance costs for insurers.
The Australian insurance industry felt there were contradictory outcomes – while consumers could pocket more savings, the focus on price would lead to lower premiums and profits and a problem of underinsurance.
But Insurance Council of New Zealand CEO Tim Grafton said he doubted how it could work, saying he had just returned from the UK where the fallout from the huge growth of price comparison sites was now beginning to really resonate.
He said: “Initially while UK insurers had cooperated with the establishment of sites, they are now suffering brand reputational issues from the result of a very sharp focus on price only and not cover.
“When prospective customers went to the sites they would look at price, then go through to the insurance company and whatever price had been quoted often didn’t reflect the premiums for their particular circumstances, so then you have price adjustments coming in and people were getting disappointed that what was on the aggregator sites didn’t reflect what they ended up paying.
“Then you have reputational issues over trying to simplify complexities of insurance cover which are individual to people in their own risk profiles on a site which is just trying to generalise totally.”
He said there was no barrier to people shopping around and switching from company to company now, but people shouldn’t expect the number of complicated factors involved in very individual insurance policies to be boiled down to a screen.
“It’s a legal contract with many dimensions to it and I guess one of the issues is we know people don’t focus on their insurance contracts and read and understand them. Sometimes it’s even a struggle to get them to look at the policy schedule which has the key elements on it with exclusions and excesses.
He said that while price comparison sites had taken off in the life insurance sector, he felt there were similar concerns to be addressed with them as well.
The Australian insurance industry felt there were contradictory outcomes – while consumers could pocket more savings, the focus on price would lead to lower premiums and profits and a problem of underinsurance.
