Allianz warns new technology and government price-checking websites risk sending insurance operators to the wall.

Allianz has also revealed theses internal premium calculators have become so advanced that a customer who got a quote in the morning may get a different price in the afternoon.

While its own can create 2.95 googol (10 to the power of 100) possible home premiums, it says some others’ can’t and that a proposed comprehensive, government-run comparison service would highlight this, potentially sending less sophisticated players to the wall.

KNOWLEDGE IS DANGEROUS

In a submission to a Senate inquiry looking at the case for an independent comparator, Allianz gives an example: Insurer A, which has a simpler price-setting engine offers 100 different would-be customers the same premium of $500 while B computes additional risk factors to offer the same 100 customers premiums of $451 for the lowest risk to $550 for the highest.

Allianz says that will lead to B attracting the 50 “better risks” while the 500 “poorer risks” choose A.

That will see A paying more, potentially larger, claims.

It will then have to charge higher premiums, creating further opportunity for B to “cherrypick the better risks” in a “vicious cycle” that eventually forces A out of the market and causes “industry consolidation, greater market concentration and a reduction in competition”.

Allianz says a comparator would likely “accelerate” this process because it would lead to a greater focus on price.

Other major insurers — and their lobby group — also argue such a service would make price the overriding consideration for consumers.

Allianz, Australia's third-largest insurer, goes so far as to make a veiled threat to quit offering certain forms of insurance if a government-run comparison service is set up.

COMPARE AND WIN

Interestingly, no small insurer felt a sufficient threat to its existence to make a submission.

And private sector comparison service Compare the Market, whose future would be jeopardised by a comprehensive, independent service, nonetheless said it was a good idea.

In its submission Compare the Market said “notwithstanding that the existence of such a website would potentially detract from the number of visitors to Compare the Market’s website”, such a service would “make it easier for consumers to compare the relative merits of competing insurers and insurance policies” as well as “intensify competition, both on features and price, between insurers, which ultimately benefits consumers”.

Compare the Market only sizes up a fraction of the market, because major insurers don’t participate.