ANOTHER NEW PLAYER
Just this month, the Australian car insurance market has welcomed another player into its ranks. Progressive Corp is a US car insurance company, and has launched a new internet based car insurance product into the Australian market. The name of the product is Progressive Direct; which has been used to describe its online nature and the ability to bypass call centres and perform every aspect of the car insurance policy online.
The Australian car insurance industry is dominated by two big players: Insurance Australia Group and Suncorp. These two companies control around 75% of the Australian car insurance market, through brands such as NRMA, RACV, GIO and AAMI, as well as a host of other specialist insurance brands.
This market domination; combined with a large market size and rising car insurance rates has spelled the perfect time for other brands to undercut the big boys and capture some of the market share. The entry of Progressive Corp into the car insurance industry follows hot on the heels of a few other major new entrants, such as Virgin, Australia Post and Real Insurance.
It may seem that Progressive Direct is going to have a tough time slugging it out with the other new kids on the block, but their innovative business model and strong financial backing indicate otherwise. Last week they secured an APRA (Australian Prudential Regulation Authority) insurance licence, which indicates they have a tremendous amount of capital behind the Australian venture. Strong financial reserves may allow them to undercut the other insurance companies in premiums to gain a substantial market share.
IS IT ANY DIFFERENT?
The major difference with Progressive Direct compared to the other car insurance companies is the ability to perform all facets of the insurance policy over the internet. This includes signing up and purchasing policies, managing the policy, and even making a claim online. However, call centre support will be available to customers if necessary; especially for large payouts and complex claims.
With almost every other industry listening to customer requests and transforming themselves into more online friendly models, Progressive Direct has taken the first step for the car insurance market. They are specifically targeting customers who prefer to bypass those half hour waits while on hold to call centres, especially for simple matters such as changing an address on a policy.
Online insurance is tremendously popular overseas; particularly in the US where the parent company Progressive Corp is based. They are the fourth largest US motor insurer and have developed a business model based online, which provides them with a superior claims management process and lower costs. Currently only 8% of Australian car insurance sales are made online, which presents Progressive Direct with an excellent opportunity to gain a substantial market share once more Australians make the move to cheaper and more efficient internet based car insurance.
Australians who already perform their banking online are just one of the groups who Progressive Direct will be targeting as their customers. Similar to internet banking, customers will be able to manage their accounts online and save significant money at the same time. With other aspects such as providing quotes and taking policy details no longer requiring expensive staffing costs, Progressive Direct has drastically reduced their overheads. Providing customers with retail outlets is also another major expense which they have managed to cut from their outgoings with an online model.
WHAT DOES THE FUTURE HOLD?
Although they will probably be operating with the least overheads of all the Australian car insurance companies, Progressive Direct are not expecting a sudden jump to the top of the car insurance market. Instead, they are planning to gradually build their market presence; but at this stage have not revealed their specific revenue or profit targets.
Progressive Direct’s initial focus will be on using digital advertising to build a customer base for private car insurance. From there, they will gradually expand into commercial, motorbike and other vehicle insurance categories. No plans are on the cards to move into the general insurance market; such as providing home and contents insurance. If the move was to occur, they would need to find another company to underwrite the policies, since the parent company Progressive Corp is a specialist motor insurer.
All in all, don’t expect Progressive Direct to tackle the big boys of motor insurance head on, but instead offer a great value for money product that will allow them to carve their own niche in the car insurance market. The entry of Progressive Direct into the Australian car insurance industry is great news for consumers, with its online business model sure to keep the premium hikes under control and possibly even trending on the decline.