Commonwealth Bank To Carry Own Car Insurance
Sydney Morning Herald
Tuesday November 20, 2007
COMMONWEALTH Bank has entered the highly competitive motor insurance business, part of a sustained attack by the big banks on the leading domestic and international insurers.Commonwealth Bank, already the country's largest life insurer, will take on the likes of Insurance Australia Group with its NRMA brand, and Suncorp, which picked up AAMI through its $7.9 billion acquisition of Promina in March. CommInsure, the bank's insurance division, has severed a previous tie-up with Allianz, its one-time motor partner, and will now underwrite its own car policies as it seeks to tap the 3 million bank customers who have either home or life cover with the bank.It is the fifth largest home insurer and is looking to quickly seize the same spot in the motor market after last week's low-key launch. Allianz will now become one of the bank's competitors, given its position behind IAG, Suncorp and the other big Australian insurer QBE, which between them control the vehicle market.Macquarie Research Equities said yesterday that the bank's decision would add to the tough price pressures being felt by the leading insurers as they tried to hold their profit margins.The Commonwealth and ANZ have in recent weeks declared their intention to squeeze more revenue out of their investment and insurance businesses by selling their own products to branch customers rather than those provided by third party suppliers.However, market watchers are sceptical of the ability of the banks to increase the amount of cross-selling, and they point to IAG's decision to offload its poorly performing health and life insurance businesses to MBF in the past five years as a sign of those difficulties.Motor insurance is the largest "personal line" insurance product in the country, accounting for 40 per cent of the revenue generated from that sector by the largest insurers.IAG has a 38 per cent share of the car market; Suncorp, which also owns the GIO brand, has 36 per cent.NRMA, AAMI and GIO have been engaged in a fierce tussle for business since Suncorp completed its friendly takeover of Promina, spending millions of dollars in TV advertising in a "battle of the brands".CommInsure, though, has decided to avoid an expensive head-on marketing challenge and will concentrate on pushing its new motor policies through the bank's 1000-strong branch network.Underwriting its own premiums would give the bank more control over the premiums, said CommInsure's managing director, Simon Swanson.