Better comparison price websites could help to cut premiums

Giving comparison websites better access to insurers’ product information could help consumers pocket big savings each year, the Murray inquiry says.

The insurance industry opposes giving websites such as iSelect access to information, fearing it would lead customers to focus on price and result in lower premiums and profits.

The interim report says there may be scope to improve comparison websites or insurance aggregators’ access to information such as motor and home policy pricing.

One option to improve aggregators’ access was to ensure they were able to use automated processes to seek quotes from general insurance websites.

”This would not give aggregators direct access to pricing models, but may provide a route to discover them,” the report says.

The five biggest insurers including Suncorp Group and Insurance Australia Group control 80 per cent of the market and won’t allow their brands on price aggregator websites.

Local insurers fear a repeat of the UK market where aggregators arose in earnest, fuelling a rapid decline in premiums and industry profitability.

”Should motor or home insurance aggregation sites take off in Australia we would expect a rapid drop in premiums, but we would also expect underwriters to withdraw capital from the system as they sought to maintain adequate returns on equity,” Commonwealth Bank of Australia analyst Ross Curran said. ”The regulator needs to weigh up the goal of encouraging price competition with the goal of having a safe, sustainable and robustly capitalised system.”

The inquiry also found that the problem of under-insurance was likely to worsen as insurers use increasingly sophisticated technology and data to price risk. For example, IAG now prices its policies at the household or address level for personal building, home and contents insurance for flood and cyclone risk.

Some consumers might face higher premiums or lose access to insurance cover altogether.

Mark Milliner, the chief executive of personal insurance at Suncorp Group, said under-insurance was best addressed by the government via risk mitigation and by insurers through better products. ”While the interim report recognised the importance of underinsurance, it also opens debate on increasing the involvement of aggregators in general insurance.

”This could create contradictory outcomes, because … aggregators’ inherently focus on price rather than coverage, which would lead to greater levels of under-insurance in the long run.”

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