Aggregator Analysis

Tom CooperFor the fifth consecutive quarter, the iGO4 price index for the best motor quote across 1000 separate risks has fallen – by a further 3.25% says Tom Cooper, Executive Director, iGO4

This quarter we counted a total of 192 ‘proper’ brands live across the eight sites monitored, and more than 50 of these were top at least once across the basket. Direct players still hold sway on motor, with Admiral again to the fore, alongside Esure, Sheilas’ Wheels, Swiftcover and Octagon, though the brokers held their own with strong performances from the Budget brand, Hastings, Express, Thames City, Autonet, One Call and iGO4 Essentials.

Rising instalment cost While the underlying cost of the core insurance product has fallen again, the total price paid by the customer may well have not. Our first analysis in September 2008 noted an average credit charge of 13% at a time when the base rate was 5%. The Bank of England soon lowered its rate to 0.5% in March 2009, where it has remained ever since. In this time, brands on price comparison sites have increased direct debit charges to an average of 17%. On a typical £500 funded premium, this will have added more than £40 to the provider’s income stream in the past four years and, therefore, the ‘soft’ market would have to be viewed with scepticism by consumers wishing to pay by instalments, with more than half likely to do so given the difficult financial climate.

The average instalment charge has risen by 3.5% in the past two years alone. While writing business on instalments is lucrative at point of sale, brands have to contend with a different kind of risk profile than that of someone prepared to pay in full. Instalment customers are three times more likely to cancel or fail to send in proof of no claims bonus, and providers obviously need to ensure they maintain their payments. As illustrated by the graph (see p14), brands have now started to increase deposits in order to mitigate any likelihood of bad debt arising. They appear to be quite prepared to push their luck on the instalment charge, as they must be able to continue to increase rates while also ensuring they do not suffering commercially. This is a risky strategy and, while a brand’s instalment penetration may well be maintained following an increase, what would be less clear is whether it is losing absolute sales as a result.

Brands are also beginning to introduce a wider range of ancillary products into their portfolios, with the cost of motor legal expenses flattening at around the £26 mark. Once again there are interesting developments to report in the price comparison arena, with Google making its first noteworthy move since the acquisition of Beat That Quote. Users searching for ‘car insurance’ on the search engine will now see Google’s own listing in the central column between the sponsored and natural search results. This is an interesting move, though not a game-changer, and the two sites most likely to be impacted – Go Compare and Money Supermarket – are unlikely to be overly concerned.

If you wish to read more please view the Post Magazine Article

*Taken from the Post Magazine October 2012

iGO4 Boosts Management Team

iGO4 Boosts Management Team with Appointment of Karen Hogg to Commercial Director Role

iGO4 Limited has appointed Karen Hogg as Commercial Director, effective 1st May 2014. Karen will report into Chief Operating Officer, James deRose. Her experience and credentials speak for themselves, with almost nine years at Kwik Fit Financial Services as head of insurer development and for the last seven years at AXA, in roles including director of panel partnerships and managing director of personal lines intermediary.

Matt Munro, Chief Executive of iGO4 Limited said: “We have built a fantastic team at iGO4 and having the best people in the right roles is crucial. We are delighted to welcome Karen to our senior team and look forward to her key contribution in supporting our aggressive growth plans for our direct business and further establishing ourselves as the partner of choice in our target markets”.

Karen Hogg, new Commercial Director, iGO4 Limited commented: “iGO4’s track record is impressive. They have grown quickly, underpinned by a culture of innovation and profitable growth for insurers and other trading partners, which is appealing to me. They do business in the right way. I can see the opportunities that lie ahead and I am looking forward to being a part of this dynamic team.”

A big growth area for iGO4 in the last twelve months has been in telematics. In addition to its direct proposition – WiseDriving – the comprehensive infrastructure and platform it has built enables it to support insurers and other motor insurance providers with a flexible and direct route into this market. iGO4 has also supported investors NMG Holdings with the acquisition of Equity Direct Brokers. The business is on track to transfer onto the iGO4 administration platform from June this year.

Matt added: “iGO4 is now working with some big brands. We can support a diverse range of insurance products including telematics. Due to acquisition and consolidation in the partnership market we offer a compelling proposition supported by insurers and the skill set required to deliver value to affinity partners.

Autumn Watch

The last IGO4 price comparison site watch reported quote volumes had started to level out and, in some cases, decline from the highs witnessed in 2012. That trend has continued throughout the summer, though the declines for some sites appear to have steadied, with the total number of quotes generated each month settling between 10 million and 11 million.

Compare the Market has bucked this general trend and surged upwards – buoyed by the public’s affection for meerkat Aleksandr Orlov – resulting in sustained double-digit year-on-year increases in quote volume, and growth in market share to 36% of all quotes generated through aggregators.

Google remains an interesting player in motor. Throughout 2013 it has doubled its quote share, albeit only from 1% to 2%, allowing it to move into the third tier of providers alongside Quote Zone and Tesco Compare, which have a similar market share. Go Compare and Money Supermarket, in particular, now have Google on their radar given their respective volumes derived from paid-for and natural Google search results. It will be interesting to see if Google’s forward momentum continues.

The size of the aggregator market and its share of overall new sales always makes for intriguing debate. When aggregators first started to emerge as a serious distribution option, conversion rates sat at around 10% of total quotes. That figure has now halved, as people visit multiple sites (2.5 on average) and get multiple quotes from each (again 2.5 on average). Around 1.75 million unique quotes are provided on these sites each month, and around 21 million per year, with 6.6 million customers taking out a new policy via an aggregator each year.

The aggregator share of the active market is more subjective. While there are around 30 million insured private cars on the road, a large number of consumers renew their policies without shopping around at all. This will be particularly prevalent in the current soft market, where – until recently – media and consumer perception was one
of increasing rates.

Rates of around 60% are commonly quoted at present. This suggests that around 55% of all of new motor policies written each year in the market originate on a price comparison site, with possibly another 5% starting on a price comparison site before being purchased from a brand directly. This overall 60% figure has been our take on the size of aggregator
share of the active market for some time now, and it seems unlikely to shift much.

If you wish to read more please view the Post Magazine Article

*Taken from the Post Magazine October 2013

The Return of Motor Madness

The push for volume in motor has started again, with a fall in rates for a fourth consecutive quarter, while home is proving more resilient says Tom Cooper, Executive Director, iGO4

For the fourth consecutive quarter, the iGO4 price index, detailing the best motor quote across 750 separate risks has fallen, this time by 4.2%, and the market is now soft rather than flat. In the
last quarter’s review, consideration was given to whether this was a mere correction of overcooking previous increases, but it is now clear there is a huge push for volume once again, with the direct writers leading the way. Reasons for this are varied and fly in the face of 2011’s collective underwriting performance, which produced a loss-making combined ratio of 106%, despite the rate increases that had flowed through 2010 and the first half of 2011.

The major protagonists will all have their own reasons for such an approach; there are the stated IPO intentions of Direct Line Group, Esure and Hastings for a start; and, for some, the need to support large operating cost bases, with the money given away at point of sale potentially underpinned by renewal income from large back books. Direct writers are dominant despite the continued retraction of competition and, as with the Spring 2012 watch observation, there has been as a 20% reduction in the number of prices returned on some risks, compared to the previous quarter. iGO4 recently experimented withdrawing from a particular segment on one site and witnessed up to a 50% increase in sales through other sites for the same business, providing further evidence that consumers visit more than one site when shopping around.

If you wish to read more please view the Post Magazine Article

*Taken from the Post Magazine July 2012

Making Changes – Price comparison sites are making changes

Price comparison sites are making changes to the way they operate, embracing telematics and moving into new product lines.

This is the twenty-third IGO4 price comparison watch and, as long ago as 2010, there has been speculation as to when aggregators for private motor would reach maturity in the UK. There were already signs back then that long-established sites were finding it challenging to maintain their incredible growth. Indeed had it not been for the remarkable success of the Compare the Market meerkat, there would have been a decline in this market two years ago.

The reasons for this are complex and not immediately obvious. It is true that each of the major player’s definition of a quote may differ, and indeed always has done, but IGO4’s measure has been consistent since 2008. The general consensus in the mass media has been of rising insurance costs fuelled by uninsured drivers, the compensation culture and profiteering by insurers; all of which will drive a certain consumer mindset. As their renewal approaches, this media stance leads customers to expect a sizeable increase in their premium. On realising that actually it remains within the range of what they might consider reasonable, their desire and enthusiasm to embark on rate comparison is reduced.

Nor is the answer as straight forward as insurers withdrawing from demographic segments that are unprofitable. This could be as a result of the increased use of external data insurers and brokers review before producing a price. This includes the widening use of credit scoring software and identity checks

If you wish to read more please view the Post Magazine Article

*Taken from the Post Magazine April 2013