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Bread, Milk & Car Insurance
Andrew Bowen

With increased competition between supermarkets to gain market share and improve profitability, the range of products on offer is getting ever diverse. Now, the big three chains, Tesco, Sainsbury’s and Asda have caught on to the fact that their brand name can sell just about anything, including of all things, car insurance.

Car insurance is one of those very boring expensive products that you loathe having to pay for but have no choice if you want to drive a car on Britain’s roads. Why therefore would supermarkets want to be associated with such a seemingly expensive pain in the pocket? Well it seems that the public think it’s a great idea and are buying it from these stores in their thousands with the belief that it must cheap if the supermarkets are selling it. The strange thing is that the companies behind these deals, who are actually underwriting the risk, are the same companies who have been selling you car insurance for years.

Tesco for example seem to be incredibly successful in selling motor insurance to their customers with statements proclaiming that you could save up to £150 compared to some leading insurers. Tesco of course is not an insurer. If you look closely at the bottom of the Tesco car insurance webpage, you will notice it says that the policy is provided and underwritten by a company called UK Insurance Limited. Who on earth is this company you may ask. UK Insurance Limited is part of Royal Bank of Scotland who also own Direct Line along with Churchill and Privilege.

Sainsbury’s state that you could save up to £165 on your car insurance compared to other leading insurers - £15 better than Tesco. Of course, like Tesco, Sainsbury’s is not an insurer either. A quick look at their webpage shows that policies are arranged and administered by Esure, who are part of the Halifax Bank of Scotland group. Maybe Sainsbury’s are about to swap Jamie Oliver for Michael Winner – maybe not.

Asda state that they give you the “very best possible insurance protection” and offer a 10% discount if you buy online. Of course, just like Tesco and Sainsbury’s, Asda is not an insurer. Asda have opted to team up with Norwich Union to provide their policies.

The insurers are desperate to get into bed with the Supermarkets. It enables them to dress up their car insurance product with an already well known and trusted brand name. This is good business and a smart way to gain lots of new customers very quickly. Ironically though, some of those ‘new’ customers may already be with that insurer. Without knowing it, they may end up cancelling or not renewing their existing policy but staying with the same insurance company via the cheaper supermarket option.

>From a customer perspective, the upshot of all this will hopefully be to get cheaper car insurance, which at the end of the day is what everybody wants. Who the insurer is behind the deal is probably not of great concern to people. In the long term, whether the actual underwriting results of these deals are profitable enough for the insurers to continue to offer the supermarkets good rates for their customers, will be interesting. One thing is for sure, I don’t see Direct Line advertising bananas six for a pound anytime soon.

Copyright (c) 2004

Andrew Bowen is the CEO of Accept Direct Limited. Accept Direct offer car insurance to UK customers through their website

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