Suncorp’s head of personal insurance, Mark Milliner, has warned against the emerging presence of aggregators, saying the discount prices found on comparison websites are unsustainable and users are trading adequate protection for price

….he also said the emerging presence of insurance comparison sites suggested price was the only policy differentiator, which”couldn’t be more wrong or misleading”.

Conclusion: don’t trade protection for price.

We think Mr Milliner is absolutely correct in highlighting this – the terms and conditions of an insurance policy are of paramount importance when pricing the product.

However, we also think Santa Milliner doesn’t eat his own Christmas pudding.

As luck would have it, we got the opportunity of testing Mr Milliner’s assertion as the Mini is up for renewal this month. As part of our research we entered “Bingle” (an internet only brand offered by Suncorp) into an internet search engine – this is what came up:

Bingle Car Insurance Bingle offer cheaper car insurance by computer. Get a quote now. www.Bingle.com.au/Sydney

Cheap Car Insurance Australia – Online Car Insurance – Bingle Bingle Car Insurance offers cheap comprehensive car insurance policies in Australia. Get a free car insurance quote and buy cheap car insurance online. www.bingle.com.au/ – Cached – Similar

Contact Us – Cheap Car Insurance Australia – Bingle Contact Bingle Car Insurance Australia for enquiries on online car insurance …
www.bingle.com.au/car_insurance/contact-us – Cached Show more results from bingle.com.au

Lara Bingle Nude Pics Where the bloody hell are you? Bingle Bungles with Greg Bird, Brendan Fevola and Nude Photos published in German … Lara Bingle In Bikini for the Where the Bloody Hell Are You Campaign … www.webmelon.com.au/viewcategory.php?categoryid=22 – Cached – Similar

Leaving to one side the reference to the Bingle of the nude-Lara-kind, the phrase that stands out on all the Bingle links is “cheap”. Clicking on the link connected us to the Bingle website – the banner there looks like this:

This was an excellent start – who doesn’t want cheaper car insurance after all? Being made of very boring stuff at Just-Ezi, we did more research – our top 15 looks like this:

To avoid being labelled as ‘simplistic’ our analysis converts the premium and basic excess to a percentage of the offered agreed value – this produces a level the playing field as a higher excess can also be viewed as additional premium (to be paid when you make a claim).

It’s interesting to note the huge range of prices, excesses and ‘agreed value’ offered – it clearly pays to do some research. All these companies are APRA-regulated/ASIC-approved, and the “newcomers” are all cheaper than the established brands.

Secondly, we compared the terms and conditions of the policies offered by the 5 cheapest insurers with those of AAMI and NRMA. All 7 insurers offer broadly the same core coverage, the differences coming in some of the ancillary/optional benefits. AAMI and Real Insurance are the pick of the bunch, BINGLE – in terms of cover offered, is bottom of the list.

Mr Milliner, we think you’re trying to have your xmas pudding and eat it – with Bingle you are, in our opinion, trading cover for price – Bingle is cheap, but you’ll get less cover than the others in the Top 5. Go with AAMI (a Suncorp brand) and you get top cover, but it’ll cost you $200 more than Bingle (and the offered excess is higher and the agreed value lower)! Mmmmmmmmmmmmm.

Here comes the shameless plug: Just-Ezi will, in the new year, be launching v2 of our site – it will be bigger, broader and more accurate: it will also include a “cover comparison” table which will allow you to quickly and easily compare both price & coverage choice.

The current picture confusing? Yes…….which is why there’s a need for comparison websites.

Insurers will tell you it has everything to do with the size of the market for the UK market can achieve economies of scale rule on such things as cost of repairs (cheaper than in Australia),  a bigger premium pool to pay claims from, better drivers and so on.

We beg to differ – driving conditions are really bad throughout the UK (it rains a lot & it snows), motorway speed limits are higher than in Australia and they live in a country where drivers are egged on by a continuous diet of Top Gear exhorting them to drive even faster in ever more exotic cars.

The answer, sorry to say, is down to poor economics – about 85% of the car insurance in Australia is written by 2 large insurance conglomerates, IAG Car Insurance and Suncorp Car Insurance.  These 2 companies  underwrite and distribute car insurance through various brands and channels – here’s a grab-bag of their names:  AAMI, APIA, AON Car Insurance, Bank Of Queensland, BankWest, Bendigo Bank, Bingle, Buzz, CGU, GIO, HBA, IMB,  JustCar Insurance,  NRMA, Shannons, St. George, Suncorp, Westpac. The list is probably longer, we just got bored of doing the research!

So, we have 2 large companies who between them dominate the market but why don’t consumers know this? The answer to this question is simple, the insurance regulator, APRA, does not collect these statistics and both IAG and Suncorp have a vested interest in not divulging them too broadly! In our view, it’s a lower level of competition in Australia which leads to higher prices.

……and then both IAG and Suncorp spend serious amounts of money marketing their brands – we would guess that the final tally is in excess of many millions of dollars per company per annum. Let’s draw some obvious conclusions:

1. spending large amounts of money on advertising raises the barrier of entry for smaller players – to enter the market you have to spend those kind of dollars too
2. this is money which could be used to pay claims………..this would reduce costs, which would lower our premiums

The fundamental conclusion is that the effect of all this is less competition than is ideal, as it is harder for new insurance company entrants to get a substantial foothold.

IAG and Suncorp also refuse to co-operate with companies like ours. – They don’t have to, and they don’t. No law says they have to, but if they did, our insurance calculator could be even more accurate and even more use to consumers! – Just-Ezi  firmly believes  that consumers are looking for a simple way to compare the premiums charged by car insurers: however, price transparency will lead to increased competition and therefore a reduction in the profits, of the big insurers. So, other than through our website, consumers are deprived of easy price comparison transparency in car insurance – despite the fact that we have such price transparency on almost everything else: flights, hotel rooms, credit cards, mortgages – the list goes on. Sure you can find a premium for your car with one insurer by spending 20 minutes on line, but who has the time to do that again and again?

Depriving the consumer of the easy price comparison transparency is an understandable strategy in the short term, but actually myopic when viewed over a longer time horizon. The impact on our society  of keeping insurance premiums high is that less people will choose to insure their car, thereby reducing the size of the pool from which losses are paid – this flies in the face of the first rule of insurance which is that the losses of a few are borne lightly by many: insurance functions well because of the law of large numbers, but the balance is a fine one, charge too much and people won’t insure – the system then breaks down – in Australia we suffer from a lack of easy price comparison transparency when it comes to car insurance which means we have to suffer higher premiums.

Car insurance companies play heavily on the fact that 80% of customers automatically re-insure with them without doing their homework and getting other quotes.

Add “compare car insurance” to your list of  ‘must-do’ activities if you want to get the cheapest car insurance you can.

Look below at just 2 case studies that we have had sent in by users of our Just-Ezi car insurance comparator.

Case study 1:
Middle-aged man driving middle-aged (hybrid!) car living in middle of eastern suburbs of Sydney – expiring comprehensive car insurance premium $1280, renewal price offered by NRMA = $1728 (he was being rewarded for his loyalty, no doubt, having insured with them for over 30 years), a 35% increase. He changed to AAMI, reduced his premium to $935 (a saving of $793, 45%!).

Our middle-aged man in his middle-aged hybrid had made no claims, in fact, nothing changed on his policy. Our middle-aged hero then went on to re-new his CTP: AAMI quoted $677, NRMA $686. So he moved his CTP policy to AAMI too – and the money he saved paid for it (and a slap up meal too!).

What conclusions can we draw from this tale?

1. Based on the CTP quote both insurers treated him as a middle-aged driver
2. NRMA don’t like hybrids? (NRMA says there is no basis for this conclusion, you decide)
3. The terms of the different policies on offer were so radically different as to justify the different prices? (seems unlikely but you decide). How do car insurers help you to compare non price differences in competing policies? Answer, not much
4. NRMA don’t like him (or want his business)
Case study 2:
Middle-aged man living in the middle of NSW driving large 4-WD, insured with Youi for $708. Youi offer renewal pricing of $755, middle-aged man (with too much time on his hands) calls Youi to complain and, lo-and-behold, manages to reduce premium to $640. A year-on-year reduction of almost 10%.

Given the aforementioned time-glut this middle-aged individual has, he actually went on-line and checked AAMI ($908) and NRMA ($1498)… pays to go with Youi, eh?

Conclusions?

1. Bing Lee isn’t the only place where ‘everything’s negotiable’
2. NRMA don’t much like him either
3. ……go find the competition – they may actually want your business enough to charge you less

So what should you do?

• Your homework – it pays to do some price comparing: the good news is that at www.just-ezi.com.au we do a lot of your homework for you… 2 days work now in 5 clicks
• Stick to what you don’t know – just because you haven’t heard of a certain insurer that doesn’t make them a poor choice (all insurance companies in Australia are regulated by APRA).

Finally, the real conclusion is that where the government forces participants to provide the consumer with easy price comparison transparency (as is the case with CTP) prices get lower but, when there is no such pressure…

Sure, the big insurance companies compete, but there are ways consumers, with our help, can make them compete a lot more, which should lower prices.

It is clear that the majority of people are looking for a minimum fuss transaction – despite what all those fun-loving late-night-partying employees of insurance companies might think, we neither have the time nor inclination to compare car insurance quotes, examine different terms and conditions and perform some sad sack cost/benefit analysis of the various policies out there.

Why am I mincing my words? Why can I not have a simple policy with a simple price which delivers on its promise?

………and this is where I get it wrong – because I try to spend the absolute minimal amount of time on my insurance transactions I have ended up with a bunch of “add-ons”  that I really don’t need.

Windscreen:   it doesn’t cost that much to replace a windscreen and, more often than not, it’s less than the average excess insurers issue your policy with. Furthermore,  in the event of a chip, find me the driver who doesn’t ignore it (all those interesting people at insurance excepted, naturally!). So, leave the windscreen to me – and the fact that you, insurer, are offering me the ability to “buy down” my excess is telling me that you think the same……..at your standard excess I wouldn’t be making a claim but I will, of course, spend money on cover you never wanted to give me in the first place.  Eh?

Rental car: I buy an insurance policy because, in the unlikely event of a crash (not the happiest day in my life), I want my car back mended and quickly………….and though I’m pissed off, I’ll find a way of making do whilst my car is off the road – what I don’t want to do is have to work out how much extra premium  I am paying for the rental car option for, if I was being thorough, it would also mean that I would have to check out (long-term?) rental rates and then compare that price with the probability of me using that option (the statistical average is that people have a bingle of some sort every 7 years) versus the premium I’m being offered by thzzzzzzzzzzzzzzzzzz…..snore!

NCB (no-claim-bonus) protection: take my advice, never, never, never take this option when offered. Find an insurer who gives you lifetime protection of your policy for no extra premium – there are plenty of them out there.

Here’s my view: there are only a few moving parts to setting car insurance premium – they are type of car, age of the car, where it is parked, driver age & experience……… all the other stuff I’ll deal  with myself  as, the more I think about it there is little doubt I’ll pay more for the extras – it’s not a whole lot different as a byo eatery……… we all know that the mark-up on wine in a fancy restaurant is 3x, whilst the cost of the penne arabiatta is about the same!

Common wisdom tells us that it is much cheaper to get covered under your parent’s policy if possible. While this drives up the cost of their insurance, it is still a cheaper way for young people to get insurance than taking out their own policy.

Building up your no-claim bonus

However, one of the impacts of being covered by your parent’s insurance policy is that you are not building up a no-claim-bonus rating of your own.

If you insure a car in your own name you build up your own no-claim-bonus rating. This may not be as expensive as it would be for older drivers because let’s face it – most young people are not driving expensive cars when they are buying them for themselves. A cheaper car is going to be cheaper to insure, so while you are young and not spending on premium cars, now is the time to build up your no-claim-bonus in your own name.

Not all car insurers want younger drivers

Plus, you really need to shop around on insurers when looking for car insurance for young people because not all insurers treat young drivers the same when it comes to insuring them. Some insurers with large books can handle young drivers as part of their overall portfolio but other, particularly some of these new entrants into the market that are advertising themselves as being very cheap actually cannot handle younger drivers and so whack on a large premium to deter buyers or if they continue they are picking up a much higher premium.

Older cars are not that much cheaper for young drivers to insure

One of the common misconceptions about car insurance for young drivers is that a 10 year old car will be much cheaper to insure than a new car. For young drivers the difference is pretty marginal and as a percentage of the value of the car actually goes up hugely.

For example, let’s say a young driver is trying to decide on buying a 1-2 year old Toyota Corolla verses say a 10 year old one. A 1 year old Toyota Corolla might be worth around $20,000 and for an under 25 year old driver could cost around $2,200 per annum to insure – so around 12.5% of the value of the car. If we look at a 10 year old Toyota Corolla worth around $5,000 the car insurance for a young driver on this car will probably be around $1,900 only $300 less! This sounds a little cheaper but clearly not much, but worse it is almost 40% of the value of the car.

Key messages:

• Younger drivers must shop around to find an insurer that wants them
• Really evaluate the benefit of having the insurance in your own name – especially for cheaper cars
• Buying an older car isn’t necessarily going to save a young driver that much on their insurance

The insurance companies would argue that their reluctance to provide young car insurance is based on fact:  young and inexperienced drivers have, statistically, more accidents than older, more experienced, drivers – consequently losses within an insurers portfolio are skewed towards the young.

Providers of cover deal with young insurers by charging them high premiums – in many cases so high that the cost of cover for young insurers can range upwards of 50% of the value of their car.

Here are 5 tips for young insurers to minimise their premium:

1. Fight your inner hoon — choose a small car with a small engine and fight the urge to modify it: let your natural character shine through, accept that your car says nothing about your personality – blokes: recognise that a supercharger, turbo or spinners tell the lasses more about the size of your ^&#$@ than you really want to let on. Body-kit is only for those that have something to hide and ditch the idea of a massive stereo with quadraphonic sub-woovers and tweeters
2. Buy local – one of the biggest costs to insurers when repairing cars are parts, and having to import that exotic rear Macpherson strut from Germany costs money
3. Drive like your dad (I want to write mum, but mine drove like a mad-lady and, anyway, it’s sexist) – the quickest way to drop your comprehensive insurance premium is to drive safely, defensively,  obey the rules, avoid being pulled up by the police and make no claims – 5 years of no claims can see you reduce your premiums by 60% with most insurers
4. Buy a new car – as a tip goes, this has obvious limitations, but it makes sense:  insurance premiums, as a percentage of the value of the car, are significantly lower for new cars — this is based on the unsubstantiated assumption that young insurers in new cars are a better risk…….however, even with a new car don’t let that hoon impulse run wild (see 1 above)
5. Do the maths – if your car is old, show insurers the middle finger and just purchase CTP (in NSW & QLD), the premium insurers will charge young drivers equates to a large percentage of the value of your car and, more often than not, insurers will not repair your old clunker and declare it a total loss — however, and here’s the double whammy, they’ll only give you what they think your car was worth at the time of your bingle NOT a new car….you’re probably better off saving the premium and paying for the repair yourself!

Clearly 5 tips for finding cheap car insurance for young people are, at first sight, not the necessary ingredients for an exciting life! Let’s be fair, however;  given that none of us want to overpay for car insurance just apply them, do your homework (or let Just-Ezi.com do it for you),  shop around, and then blow the savings on a great evening out.

So forget about all that car insurance brand marketing – the image of one single cheap car insurance company is a myth.

Car insurance companies are very careful about who they offer insurance to and for how much, they hire an army of actuaries to help them make sure their insurance ‘books’ are balanced. The prices that they offer depend on many things but not the least of which is the current mix of all the cars and drivers they are currently insuring.

Are you being used to balance the books?

Car insurers offer lower prices to certain market segments when they want to ‘balance’ their portfolios. For example if they have taken on too many young drivers they may be looking to balance their ‘book’ by trying to attract older 60+ year drivers so they start offering lower prices to make themselves more attractive to the driver segment that they are trying to recruit.

It works the other way too of course. If you are a segment that they do not want right now, then they will inflate your price and you will be paying a premium to be that insurer instead of one that is looking for someone with your profile!

This concept of portfolio balancing is not just based on driver age either. It is based on other key criteria like post code or car make.

The bottom line of this balancing is that when you look across the full set of Ezi-Quotes that we have assembled to help you find the cheapest car insurance no single insurer is always the cheapest in any single segment.

So use our car insurance comparison tools to compare car insurance and find the cheapest car insurance for you.

Tony is Australia’s leading analyst on insurance sees Just-Ezi as a potential motor insurance game changer.

Below are a few key points from Tony’s paper published as a result of a number of interviews Just-Ezi CEO David Issa.

In a nutshell:

Personal insurance rates have increased by 30%+ over the past two years.

The leading insurers argue that the price increases reflect recent catastrophe
experience while the smaller, more recent entrants point to price ‘gouging’ in the motor market.

Just-Ezi has a fundamental belief that price transparency in the car insurance market is very good for the consumer.

Tony is analysing the potential implications our recently launched www.justezi.com.au price comparison website, on motor insurance pricing transparency, policy churn and ultimately, motor vehicle insurance margins.

Effects of car insurance comparison sites in the UK

Tony has the following key comments on the UK market:

“Price comparison websites now dominate the UK motor insurance distribution landscape (43% of sales in 1H09 up from only 7% in 2005) and contributed heavily to the commoditisation of the market, an extremely price sensitive consumer and low (if not in most cases sub-economic) margins.

Consistent with growth in price comparison website traffic, UK motor insurance renewal rates have fallen to 40% (‘churn’ has increased to 60%) while Australian renewal rates have remained broadly steady at 80%+.

IAG and SUN are highly protective of renewal business, which is less price-sensitive and vastly more profitable than new customer ‘churn’ business.”

Major players have to date managed to suppress comparison sites

Tony also notes:

“To date, price comparison websites have failed to penetrate the Australian private motor insurance market as it is dominated by IAG and SUN, which together own and/or control the major (trusted) retail brands for which the premium ratings engines are not made available.”

Just-Ezi makes car insurance comparison really possible

“Just-Ezi may achieve what all other local price comparison websites have failed to deliver via an algorithm which estimates the premium rates of the major motor insurers. Whilst accurately estimating premium rates is obviously the goal, Just-Ezi‟s real value proposition is to accurately rank insurers from cheapest to dearest (for which management claim >90% accuracy).

It is well known that when consumers are given choice a more competitive market is created and prices drop. In the case of car insurance we believe Just-Ezi, by means of our league of Ezi-Estimates, will reduce premiums for the average Australian to less than half of what they pay now.

None of this is new: a significant reduction in prices has been seen in the UK market where comparison sites have been around for over 10 years. And in NSW for Green slips the ability to easily compare insurers with the “MAA Green Slip Calculator” (www.prices.maa.nsw.gov.au) has kept the difference in pricing between participating insurers to less than 15%.

There is another reason for insurance being expensive in Australia: around 75% of the car insurance market is controlled by two companies, being Suncorp and Insurance Australia Group (IAG). This little known fact has resulted in these two institutions owning in excess of 20 different car insurance brands, which means that the majority of Australians will, in all likelihood, be insured by one of them. When the majority of the market is controlled by just two players, there exists no competitive pressure to reduce prices.

Comparison sites reduce costs for they create price transparency. By listing the prices from all the providers of the service in one place customers are able to make an informed choice. In Australia the only significant market which does not have comparison sites is in car and home insurance, depriving customers of a fair deal – after all, it’s only fair to compare!