US insurance giant moves in online
The Age
Wednesday December 9, 2009
US INSURANCE giant Progressive Direct is looking to snare a slice of the nation's $9 billion car insurance market with internet-only selling.Several overseas companies have been circling the Australian market, but Progessive's entry represents by far the biggest headache to the major local players.At present, 75 per cent of the local car insurance market is dominated by Insurance Australia Group, which sells insurance under the RACV and NRMA brands, and Suncorp, which controls AAMI and GIO, as well as a clutch of specialist car insurance brands.Progressive, which ranks as the fourth-biggest car insurer in the US, argues that its online-only product has a superior claims management process and substantially lower costs.Progressive Direct managing director Simon Lindsay said: "There are still a lot of inefficiencies in car insurance and this is one area to help bring down costs."Mr Lindsay, a former investment banker, said online insurance was a popular option overseas, but less than 8 per cent of insurance sales in Australia were made through the internet.Mr Lindsay said the insurer would also provide call-centre support if customers faced more complex claims, although most claims were relatively modest, he said, with payouts of between $2000 and $3000.Analysts argue that players like Progressive could create big headaches for the likes of IAG and Suncorp."It could have a profound impact on the structure and profitability of the Australian industry over the next few years," said EL&C Baillieu analyst Stewart Oldfield.Progressive's entry follows a period during which the major players have been able to push through price rises up to 10 per cent.For IAG and Suncorp, the biggest danger to their market is that cashed-up players like Progressive, which has a market capitalisation of more than $US11 billion ($A12 billion), will take an aggressive loss-leading approach to secure a beachhead in Australia.Progressive, whose parent company has a AA+ credit rating in the US, last week secured an insurance licence from the Australian Prudential Regulation Authority, which means it will be required to have capital backing its insurance claims.Initially the insurer will look to sell standard car policies, but it may expand to motorbike and specialised auto insurance.It has no plans to branch out into other forms of general insurance such as home and contents.
© 2009 The Age
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