The recent decision by AAMI to close its retail branches in mid-2011 is a clear sign of the times, demonstrating consumers’ preference for the convenience of the internet or phone compared to the traditional retail corner store.
The insurance market in Australia is a complex beast, and is fast having to transition to new distribution platforms in order for insurance companies to remain competitive and maintain or grow revenue and profit margins. These new platforms are growing quickly – these include aggregators and price comparison sites. These sites allow the general public to be presented quote comparisons of various insurance products, from Health Insurance through to car and life insurance.
It might seem that a distribution platform based on price comparison of insurance products is a big win for consumers. However, the truth is somewhat different. Aggregator and comparison sites are frequently conflicted regarding the comparisons they provide. Case in point: A wholesaler pays you 20% commission for each blue, red and green widget you sell. A different wholesaler sells identical blue widgets for half the price using his own distribution channels (0% commission). Is there an incentive to try and sell the cheaper blue widget belonging to the other wholesaler? Of course not. Herein lies the reality of comparison websites – the companies actually being compared, and providing the quotes are tightly affiliated with the comparison product (aka ‘Participating insurance companies’). Other insurance providers (not affiliated with the comparison product) will not be listed. Hence the guarantee of ‘best’, ‘cheapest’ or ‘comprehensive comparison’ is frequently tenuous at best.
An example of how distorted some insurance comparison sites can be is illustrated by the fact that 70% of the personal insurance lines market in Australia is provided by IAG and Suncorp companies. Both IAG and Suncorp have resisted becoming affiliated with most comparison sites to date.
So next time you look at a comparison site – keep in mind the limitations, and remember you are being given a selection of ‘preferred providers’ to look at.

Thanks for that Thinker. When I purchase anything I get the best option because I look and ask, it is a consumer positive market at the moment. I wonder two things, how the poor sod who purchased what I purchsed with a 30% to 50% premium survives and how much margin the seller is prepared to give up for a relatively small purchase. Regarding life insurance brokers the ACCC should mandate that a pie chart showing the various dispersions of your premiums be exhibited for every policy, then at a glance you could see how much of your premium actually goes towards the policy and the return.