International competitors put insurance industry at risk
Jeffrey Scott
The Australian insurance industry must innovate to avoid being tapped by new international players, according to CommInsure executive manager, growth services Jeffrey Scott.
New distribution methods, such as selling insurance through pet stores, supermarkets and petrol stations “are threatening the way advisers do life business”.
Scott pointed to baby food brand Gerber as one example. It sold life insurance policies to the tune of $30 billion in one online campaign.
Other potential entrants to the insurance market include mega brands such as the Wall St Journal, Microsoft, IBM, Coca Cola, Walmart and General Electric, Scott said.
The good news is that while consumers are increasingly turning to the Internet for information on insurance policies, the majority still want to see an adviser for implementation advice.
The bad news is that there are a number of issues hindering the Australian insurance industry, including the inability for product providers to differentiate their products, with benefits and features easily replicated, and what Scott referred to as “phantom volume growth”, otherwise known as ‘churning’.
“In Australia, one in every five insurance policies is churned,” Scott said.
Another hindrance is the time taken to process policy applications. According to Scott, insurance companies must reduce turnaround times in order to capitalise on emotion-based purchasing decisions.
Scott said Australia could take a few lessons from the worldwide leader in insurance distribution — Mexico — saying “administrational efficiency is the key to profit growth”.
Scott also flagged the possibility that within five years insurance companies may begin including personal information such as driving records, criminal records and the amount of overseas travel undertaken by an applicant in their policy assessment. Many of these ‘pursuits’ are already included in insurance assessments overseas.
As has been well publicised, the Australian insurance market is relatively untapped. According to Scott, outside of policies held within super, only 21 per cent of people own life insurance, 7 per cent own income protection and only 2 per cent own trauma insurance.
“More people use RSVP.com,” Scott said.
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