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Trade Me enters life insurance market

Trade Me has entered into an agreement to purchase LifeDirect, run by the people behind Quote Monster, for an undisclosed sum.

Wednesday, August 21st 2013, 10:46AM 25 Comments

LifeDirect has been selling life and health insurance since 2005 and has 11 staff.

Trade Me chief executive Jon Macdonald said the move into insurance stacked up well. “Online health and life insurance will be a new revenue stream for us, but we think it’s a logical move into an industry adjacent to our existing portfolio.

“As New Zealanders continue to move more of their lives online, insurance is an area where it makes a lot of sense to shop around to get a good understanding of the choices available. We believe providing consumers with a single venue to compare insurance products easily and efficiently is sound, and aligns with Trade Me’s core purpose of connecting two parties to undertake a transaction.”

Macdonald said Trade Me had been impressed with LifeDirect’s smart approach and the acquisition demonstrated the online marketplace’s appetite for acquiring good businesses with lots of potential. “It’s a well-run business and has very good prospects. Like our other businesses, it’s primarily web-based, provides consumers with a useful service, and helps people make smart purchasing decisions.”

LifeDirect co-founder and operations manager Tim von Dadelszen said it was “a damn exciting time” for his team. “We’re looking forward to letting more Kiwis know about what we do, and how we can help them out in an area of their lives they may have regarded as pretty boring up until now. The mix of LifeDirect’s insurance smarts and Trade Me’s strong brand and trusted platform presents a heap of exciting opportunities.

“We’re rapt to be joining Trade Me, too. It’s an iconic New Zealand company that has used technology to empower consumers and disrupt traditional business models – we like the sound of that.”
   
Macdonald said there were growth aspirations for LifeDirect but Trade Me would be leaving it alone to operate as a stand-alone business for the foreseeable future. “We don’t want to distract them – we want them to move fast, be flexible and keep innovating. LifeDirect has a strong team in place and we see Trade Me as adding value primarily as a source of new customers.”

The purchase price is confidential and is not material to TradeMe. The transaction is cash funded. A due diligence process has been completed, and a sale and purchase agreement was signed last week. The deal is conditional, and expected to be completed in September.

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Comments from our readers

On 21 August 2013 at 11:21 am Barry Milner said:
Oh great! Supermarkets, the Warehouse and now TradeMe selling life insurance products to an unsuspecting public. Where is the advice, where is the adviser relationship so important at claim time. Here we are, advisers being put through the wringer and having to jump through hoops just to remain in business, we have to carry expensive P.I. insurance and be members of approved disputes resolution schemes and yet any Tom, Dick or Harry it seems can sell life insurance on line. I wonder what would happen if, through our various professional organisations, we AFA and RFA advisers threatened to withdraw support from those companies which give agencies to the on-line sellers. I suspect that collectively we advisers are a far more valuable source of business than the on-line sellers, perhaps it's time we flexed our collective muscles.
On 21 August 2013 at 11:32 am MJS said:
Smart move, indeed.

It is simple enough to see that the "20% discount" is not exactly that - it's a simple rebate of 20% of first year premium, paid in advance as a lump sum.

As the punter pays the full monthly premium from the outset, there's a reduced risk of 1st anniversary premium-hike jitters leading to cancellation, but only reduced.

Assuming a modest but middling 180% total up front commission, the cost of the cash-up-front 20% rebate (presumably free of claw-back risk to the client) equates to 11% of initial commission.

For the life of me, I can't work out a way this can be self-funded on any pendulum or other leveled commission arrangement.
On 21 August 2013 at 11:53 am IndBroker said:
This is exactly the reason I have never put any of my clients personal information into the Quotemonster website.. I can't believe brokers have given so much of their clients information to their competitors??
On 21 August 2013 at 12:04 pm Vinny said:
Congratulations to LifeDirect. This is a great and logical move - and will work well in my opinion.

P.S. Don't worry about negative comments from brokers - they're just jealous.
On 21 August 2013 at 12:05 pm Amused said:
Good point you raise there IndBroker. SureApp from Konnect (been piloted by Asteron) will eventually see mortgage brokers/insurance advisers able to avoid dealer group software like Quotemonster and deal directly with the insurers themselves. Might take a while but it's going to happen folks.
On 21 August 2013 at 12:13 pm Andy said:
Barry - I'm with you on this one mate: Are the full policy wordings and exclusions properly disclosed, compared and explained prior to the policy being finalised? If I advised my clients purely on premium alone, or policy discounts alone, I would be hung, drawn and quartered!
When will the FMA get its head out of the (self-serving) clouds and start teaching people that you get what you pay for, and good advice does not come free?

And for the supporters of this - No - I do not see this as a threat to my business. I see it as a threat to the well being of the public, and an unsuspecting population depending on a proliferation of cheap, unreliable and ill-advised financial safety net. I sell certainty to my clients. These on-line providers seem to be selling cheap insurance products based on price alone. For the sake of the public - please prove me wrong.
On 21 August 2013 at 12:18 pm Warren Duff said:
I totally agree with the comments rom Barry Milner but sad to say nearly every commodity I look at purchasing is on line. Every day there is a swarm of emails in my inbox offering wares for me to purchase. Sorry Barry but the world is changing. The days of AFA's and RFA's have a number on them and its a digit of 10 before none of us are left.
On 21 August 2013 at 1:08 pm Snoop said:
@Barry Milner - do you not realise that some potential customers don't want to go through the advice process? They would rather have a simple sales process with a simpler product, higher price, and perhaps pre-existing condition or other conditions.
On 21 August 2013 at 1:16 pm billy the broker said:
Its all about getting the premium on the books and profit...companies don't give a flying%$#@ to the life insurance agent population. You have to be naive not to know this by now.
On 21 August 2013 at 2:05 pm Richard Pykett said:
I’m sure there is a place for online sales with a segment of the market, but not a place that I would want to be. My understanding is that persistency of this business is not great – which benefits nobody. Ind Broker and Amused – you don’t need to belong to a dealer group to access independent CRM and Quoting software. Out tools are not having strings pulled by any of the Groups or Carriers.
On 21 August 2013 at 3:33 pm Ron Flood said:
Life Direct has been in the market for years, why the sudden panic. Client's who buy through on-line sites don't want advice and are price sensitive.
Given that we are a country with an under insured population there is plenty of business to for us all.

The more people motivated to purchase insurance, irrespective of who is promoting it, the better.
On 21 August 2013 at 3:51 pm Rasta said:
There is a huge swathe of NZers who aren't serviced at all by Brokers and never will be. If selling online gets more kiwis covered, albeit not as well as via a broker, I say good move. By the way online insurance will probably start warming up a new group for full advice products in future. Maybe brokers should look to supplement their advice products with their own online offers to generate future leads?
On 21 August 2013 at 4:00 pm Observer said:
For goodness sake let’s grow up as an industry. The fact is technology is driving change, and rather than throw bricks, think about how you can use technology.

There was an article out recently reporting lapse rates in Australia that suggested lapse rates were 39% in the first year. http://www.asiainsurancereview.com/News/View-NewsLetter-Article/id/28059/Type/eDaily. So it may not be a viable business model and the life direct crew have executed a great exit strategy.

It could be that lapse rates on direct business are higher as the purchase may have been made for a single purpose, and now that the purpose has been removed, cover is cancelled, or maybe it is due to the client getting past the discount and seeing an increase of 35% (20% increase + rate for age increase).

The fact is new distribution channels will continue to emerge and rather than bleat and complain, think about what it is that you are offering to the public.

By the way, what if trade me were smart and offered access to RFAs for clients how wanted advice, I bet there would be queues of people lining up to condemn for that as well.

Perhaps the conspiracy theorists will see Pinnacle joining trademe :-) Just saying.
On 21 August 2013 at 4:09 pm Kevin said:
Wait for the claims Molly, wait for the claims...
On 22 August 2013 at 5:02 pm Realist said:
Rasta - well said

Amused - Quotemonster is not restricted to a dealer group (although some use it) you as an independent can use it and the quoting part of the tool is free, it’s the product analysis part that you pay for and that is still great value, however you look at it.

SureApp is just a new quoting and online application tool it will not provide you with a broad range of quotes from different Insurer’s as QM does.

Also LifeDirect does have comprehensive underwriting

And before one of you say it no I don’t work for lifedirect, I work for an insurance company and my spouse is an adviser.
On 22 August 2013 at 11:04 pm billy the broker said:
But saying that its all about the bells and whistles we can add......as we do...
On 23 August 2013 at 11:25 am MJS said:
@ Realist - "Also Life Direct does have comprehensive underwriting". Surely not - Life Direct is not an ISSUER, merely a broker using a range of Issuers. As such, it has as much underwriting as I have: 20+years of experience, and a developed sense of what the likely outcome might be, but I don't do the underwriting.
On 23 August 2013 at 12:47 pm Just Saying said:
I do like Quotemonster, only wish i could rely on the premiums being correct.. too often they are wrong and not reliable!
On 23 August 2013 at 12:59 pm Craig Pope said:
I don't see Trademe/Life Direct being any less a threat than clients getting insurance products direct from the bank.

Yes, people buying online might not get the same advice as through an adviser, but you can't stop the old 'do it yourself' Kiwi culture/attitude. Not ideal but it is what it is.
Online DIY is always going to have it's segment of the market. Just as there will always be people who need to sit down face to face and do it more thoroughly.

There's quite a few online players in the market including Kiwibank now flogging it online and Sovereign have their own site (the domain name escapes me but have seen their banner ads).

At the end of the day we can all (if we have the money) spend a bucket load of cash and come up with our own clever software and website. We can all play smokes and mirrors with the 'discount' and offer a 20% rebate like Life Direct does. However its a high risk area (investment v return) for a small segment of the market.

You will always have to move with the times and technology but there is still a big place for lead generation such as good referrer relationships, word of mouth and client referrals for the more traditional models.
On 23 August 2013 at 4:05 pm Informed said:
Online is either you're friend or, if you try & ignore it, it becomes your enemy. Multi-channel marketing affects almost every business avenue in today's global marketplace. Adapt or die.
On 23 August 2013 at 5:46 pm Barry Milner said:
I am not afraid of technology, but I find it strangely anomalous that the authorities who are so zealous in their quest to have this industry regulated and to have a home for the buck (it stops here with the adviser) should allow such an important financial product as life insurance to be sold on line.

Just wait until non disclosure causes claims to be rejected, the wailing and crying will be terrible and who will the public blame, the insurance industry represented by, that's right the advisers.

Look for this continuing story at a television near you, Campbell Live or Fair Go would be good places to start.
On 24 August 2013 at 1:48 pm Kev said:
If the lapse rates for direct business are anywhere near 30-40% combined with the cost of TV/radio advertising to attract customers I honestly don't think quality advisers have anything to worry about - doesn't seem like a viable business model to me - and I doubt it's the insurers favourite distribution channel either...
On 26 August 2013 at 10:34 am Realist said:
@MJS - I am sorry you took my comment so literal. All I meant was that Life Direct clients are subjected to comprehensive underwriting and not simply PEC as some of you are implying.
On 26 August 2013 at 3:13 pm MJS said:
@Realist - excuse my thickness but PEC means?

EDITOR says: Pre-existing conditions
On 29 August 2013 at 5:26 pm Amused said:
@Realist

SureApp will have a broad range of insurers eventually so yes advisers will be able to give our clients multiple quotes/options like on QuoteMonster. I know that OnePath are looking at signing up (to join Asteron) and so are other big insurers. With Sureapp been through Konnect it is fairly obvious that all the major life insurers in NZ will be on Sureapp in the near future.

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