Is the intense competition between comparison sites delivering value to insurance providers?

54 Part 1 Introduction Their revenue model remains a fairly basic CPA-based one [cost per action – explained in Chapter 9], typically charging flat or near-flat fees on conversion only so costs remain predictable. After Google changed the rules about brand protection, I haven’t actually seen many aggregators buying branded keywords, at least not the brands of those insurers in their panel, so they are not having such an impact there either. Where they do massively impact costs is in generic keywords. Words like ‘car insur- ance’ have become prohibitive for all but the deepest-pocketed direct insurers. These words tend to be typically low converting so the impact on actual sales or direct RoI is not big. The missed opportunity from not being able to effectively use those keywords as part of your brand activity is more difficult to ascertain and easy to underestimate. Aggregators have made the drive to find a better value attribution model to replace today’s ‘last click takes all’ more urgent. Until such time, and purely from the perspec- tive of generating sales, comparison sites don’t seem to be significantly increasing our marketing costs. Q. Could you see more insurance providers taking the Direct Line approach to comparison sites? Roberto Hortal, MORE THN: I can certainly see some scenarios where direct insurers may decide to pursue similar policies. I can even think of some where this may be a very successful move for a strong direct financial services brand. However, I would caution anyone thinking about going down that route to stop to think for a minute about the reasons behind aggregators’ wild success, and the lessons that need to be learned from it. Customers have loudly voted with their clicks for a channel that brings convenience to them and helps them make a choice on the basis of what the vast majority of them consider to be the key decision points: choice and price. Anyone looking to buck the trend and go against consumers’ clearly stated expectations would do so at their own peril. Q. Is the rise of price comparison sites impacting premiums or levels of insur- ance coverage? Roberto Hortal, MORE THN: Financial services is a very strongly regulated market- place. Consumers can be sure that, whatever the market pressures, regulation ensures cover levels and premiums are reasonable and appropriate. I have seen some companies launching basic cover products to more effectively compete on the aggregators. I haven’t seen reliable adoption figures for those prod- ucts so I wouldn’t be able to tell whether these are really being adopted by consumers or are they just adding noise to an already deafening marketplace. This is not some- thing MORE THN is doing. In terms of premiums, price comparison is making providers’ pricing a lot more transparent, and may be driving some to lower their premiums to better compete in the marketplace. Again, I can’t say this is something particularly impacting on MORE THN premiums, as we are fully aware of the need to grow a sustainable business over the long term. Q. How do cashback sites compare to comparison sites in terms of effectiveness? Roberto Hortal, MORE THN: Cashback sites share just two characteristics with price comparison sites: they are consumers’ favorites and they offer us a predictable marketing cost model based on CPA which makes it easy to work with them. That’s really where the similarities end, as far as I’m concerned. For consumers, cashbacks provide none of the convenience that aggregators do. For merchants, cashbacks firmly root the market back to nonscalable territory. They 55

Chapter 2 E-commerce fundamentals

provide no real extra reach – at least nothing compared with aggregators’ ability to display an insurer’s prices to all its visitors. From that point of view, cashbacks are just glorified online directories, so basic in fact that they need to incentivise people to visit them and give away listings’ impressions to merchants in order to generate business. Cashbacks are important because they have found the single proposition that consumers value over convenience; hard cash. I see cashbacks as competing with, rather than complementing, comparison sites. Savvy consumers are already making comparisons on the aggregators, then heading off to Quidco to make the purchase. This behaviour threatens the long-term sustain- ability of the price comparison sites in their current incarnation, as well as opening the door to interesting opportunities for cooperation and cross-pollination among them. What is most interesting to me is the social media potential of cashback sites. Cashback sites work with their customers purely on trust. This trust is generated via tools such as merchant ratings, discussion forums, blogs, etc that allow users to weed out the bad merchants and promote the good ones. An active community of users poten- tially recommending your brand to their mates for immediate purchase? Who wouldn’t want a piece of that? Q. How are retention rates working out for customers referred from comparison sites, affiliates, search, cashback sites etc? Roberto Hortal, MORE THN: It’s been widely reported that retention rates for customers from channels which prime price over value are lower than average. It’s not just the channels themselves; the barrage of insurance advertising people are constantly under is helping educate people about the potential savings to be had by churning. From my point of view, lower retention rates are largely a long-term trend of our own making. Car insurance, much like mobile phones, is largely a saturated market and companies grow their books primarily by taking others’ customers. Aggregators and cashbacks have certainly accelerated this trend and making it even more urgent for the industry to find a way to reinvent itself so that either this long- term trend is reversed by aggressively rewarding loyalty, perhaps or the industry adapts to provide the shorter-term products people seem to prefer these days. What proportion of your sales is being generated through the web, and can you break that down by channel eg affiliates, comparison sites etc? I am not able to give a precise figure. However I will say that eBusiness that’s what we call the aggregate of Direct Web and Aggregators at MORE THN is our main sales channel. People have clearly adopted the internet as their preferred option when it comes not just to research, but also to purchase of general insurance, and we’re clearly seeing this ourselves. Q. How does online acquisition compare to offline in terms of cost? Roberto Hortal, MORE THN: While individual channels’ Cost Per Sale vary, and it could be claimed that online channels tend to carry a lower ‘last click’ CPS, the truth is that offline spend contributes massively to creating awareness and driving searches, direct visits, affiliate clicks, etc. I am not convinced that talk about ‘online costs’ and ‘offline costs’ contributes much. I prefer to spend my energy trying to find a good model to split each sale’s attributed value proportionally to every single activity that, over time, contributed to this individual customer finally making a decision to purchase our product.