by Rob Hosking
Group chief executive Jim Minto says the company’s Australian operation is likely to go down this road first but that New Zealand is unlikely to be far behind.
“There’s been a global change in the way people buy insurance products,” says Minto. “In the UK, for example, 6% of all term life insurance is sold through Tesco – a supermarket chain.”
Minto says Tower’s principle business will be through agents and advisers.
“That part of the market delivers technically complex products to business and high net worth individuals. That’s part of the market we specialise in and it won’t change.”
But one of the effects of the regulatory changes in Australia over recent years has been that advisers and agents are less inclined to service the part of the market which involves more simple products, mainly because the costs of the red tape involved make it less profitable.
There is also – in both Australia and New Zealand – the issue of underinsurance, which Tower, along with the rest of the industry, looks set to address head-on over the next year or so.
“Customers buy health and car and other insurance from us but they don’t buy life. Why? We’ve never asked them.”
There are some big goals behind this talk. Tower aims to have 50% of sales coming through new channels by 2008. Those include mortgage brokers, and direct selling via television.
Tower’s insurance performance in New Zealand was not good over the latter part of the year.
Although the overall company produced a very good result - $42.7 million, up 67% on last year’s result – the New Zealand insurance business did poorly.
“The New Zealand market has a huge underinsurance problem. It has only grown 3.5% in the past few years. If you just take account of age bands – as people get older generally the price gets dearer –and CPI indexing, because most people choose to index their policies. - Just those two factors along should be providing something like 6% growth.
“The fact that there’s only 3.5% tells us the market is shrinking. There’s a huge opportunity to increase growth rates in this market. Tower has a 5.7% market share.”
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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