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THE internet is stirring up competition in Australia's $7.5 billion car insurance market as new and established players look for ways to drive down price.
The premise is simple; by setting up shop online, insurers are able to strip away a lot of their overheads, such as call centres and retail outlets, and pass on the savings to their customers.
RateCity, which compares financial products for consumers, estimates the savings are often in the hundreds of dollars. It is part of a wider shake-up of the $24bn general insurance market where the advent of new players such as Coles (available at present only in Tasmania), Australia Post and Virgin is expected to put pressure on the larger insurers to stabilise premium rates.
For a long time the market has been dominated by four players -- Suncorp, Insurance Australia Group, QBE and Allianz -- and premium rates have been climbing steadily amid rising claims costs.
But in recent years there has been a proliferation of so-called challenger brands -- names such as Budget Direct, Cashback Car Insurance, Ozicare, ibuyeco, Real Insurance, Youi and Bingle Insurance -- that are predominantly online businesses, offering much cheaper prices.
Many of the new entrants are underwritten by Auto & General Insurance Company but some are owned by the big four insurers, such as IAG's latest offering, The Buzz.
RateCity chief executive Damian Smith believes they are growing at a much faster rate than the rest of the general insurance sector.
"They have much more aggressive use of technology to acquire customers and get people through to a call centre and most have quite different business models, so bonus payments or more aggressive refunds for loyal customers or the 'pay as you drive' model where people are paying on the basis of kilometres used," he says.
In comparing the insurers, Smith says, the challenger brands such as Budget Direct are almost always cheaper.
But he says the big frustration for consumers is the unwillingness of the majors to allow live comparisons of their prices and any other features that may be attractive.
"Consumers are entitled to be angry at this lack of willingness to genuinely compete," Smith says.
Virgin Money Australia managing director Matt Baxby says Virgin Car Insurance, sold online, is 35 per cent cheaper than the average policy price of AAMI, GIO, NRMA and QBE.
"We have worked really closely with our insurance partner to make sure the pricing is as competitive as it can be and key to that is making sure the business is run really efficiently, and one of the key drivers is not having any middle man between us and the customer," Baxby says.
However, some are sceptical of new insurers offering significantly reduced premiums, saying that in a rising claims environment lower prices are not sustainable.
QBE Australia chief executive Terry Ibbotson has reportedly warned consumers that the new entrants may be forced to correct their pricing.
KPMG insurance sector head Brian Greig says premium rate increases drove a 4.3 per cent increase in gross written premiums last financial year to $35.2bn as insurers tried to manage rising claims costs and offset the effect of lower investment returns.
THE internet is stirring up competition in Australia's $7.5 billion car insurance market as new and established players look for ways to drive down price.
The premise is simple; by setting up shop online, insurers are able to strip away a lot of their overheads, such as call centres and retail outlets, and pass on the savings to their customers.
RateCity, which compares financial products for consumers, estimates the savings are often in the hundreds of dollars. It is part of a wider shake-up of the $24bn general insurance market where the advent of new players such as Coles (available at present only in Tasmania), Australia Post and Virgin is expected to put pressure on the larger insurers to stabilise premium rates.
For a long time the market has been dominated by four players -- Suncorp, Insurance Australia Group, QBE and Allianz -- and premium rates have been climbing steadily amid rising claims costs.
But in recent years there has been a proliferation of so-called challenger brands -- names such as Budget Direct, Cashback Car Insurance, Ozicare, ibuyeco, Real Insurance, Youi and Bingle Insurance -- that are predominantly online businesses, offering much cheaper prices.
Many of the new entrants are underwritten by Auto & General Insurance Company but some are owned by the big four insurers, such as IAG's latest offering, The Buzz.
RateCity chief executive Damian Smith believes they are growing at a much faster rate than the rest of the general insurance sector.
"They have much more aggressive use of technology to acquire customers and get people through to a call centre and most have quite different business models, so bonus payments or more aggressive refunds for loyal customers or the 'pay as you drive' model where people are paying on the basis of kilometres used," he says.
In comparing the insurers, Smith says, the challenger brands such as Budget Direct are almost always cheaper.
But he says the big frustration for consumers is the unwillingness of the majors to allow live comparisons of their prices and any other features that may be attractive.
"Consumers are entitled to be angry at this lack of willingness to genuinely compete," Smith says.
Virgin Money Australia managing director Matt Baxby says Virgin Car Insurance, sold online, is 35 per cent cheaper than the average policy price of AAMI, GIO, NRMA and QBE.
"We have worked really closely with our insurance partner to make sure the pricing is as competitive as it can be and key to that is making sure the business is run really efficiently, and one of the key drivers is not having any middle man between us and the customer," Baxby says.
However, some are sceptical of new insurers offering significantly reduced premiums, saying that in a rising claims environment lower prices are not sustainable.
QBE Australia chief executive Terry Ibbotson has reportedly warned consumers that the new entrants may be forced to correct their pricing.
KPMG insurance sector head Brian Greig says premium rate increases drove a 4.3 per cent increase in gross written premiums last financial year to $35.2bn as insurers tried to manage rising claims costs and offset the effect of lower investment returns.
