Shaking up the key players

The departure of Debra Williams from comparison site Confused and Richard Mason from Moneysupermarket earlier this year could have been a major blow to a sector that has just a smattering of major players.

Aggregators might have triggered one of the biggest revolutions ever to impact how insurance is sold, but also have had to defend themselves against increasing scrutiny.

A recent report from consumer champion Which? advised that customers could get a better deal if they go directly to an insurer. Then there was a report from Defaqto, which said that no site provides customers with complete coverage of the market, contrary to the advertising claims of the sites.

In addition, there’s the FSA’s review of the sector to contend with, plus debates over whether the aggregator space is becoming too crowded, and whether web giants such as Google pose a threat.

So are the leaders of the aggregator world prepared for the battle ahead?

Insurance Times interviewed the heads of the UK’s top three comparison sites – Carlton Hood of Confused, Andy Leadbetter of Moneysupermarket and Hayley Parsons of Gocompare – to find out.

Carlton Hood, chief executive, Confused

The newest joiner to the aggregator arena is Carlton Hood, who arrived in Cardiff in May this year after spending 10 years working in South Africa for life assurer Old Mutual.

Hood took the helm at Confused after managing director Debra Williams announced in June that she would be joining Highway Insurance Group in October.

Hood says: “I think she made that decision probably before I arrived and she waited until there was someone new in place. We had a long chat about it and I was quite keen for her to stay, but given the journey she’d been on, I respected her decision to leave and I wish her well.”

Initially, Hood wasn’t convinced he wanted to join Confused. He wasn’t familiar with the sector and, at 37 years old, the self-proclaimed city slicker was thoroughly enjoying living in sunny Cape Town.

But while he was in London on business, an executive team from Confused paid him a visit and convinced him to come on board. Since then Hood’s been hooked.

“Forty per cent of car insurance sales now are passing through an aggregator, which is huge. And with RBS having joined our panel earlier in the year, you’ve really got the majority of the industry, with the exception of Direct Line, that have accepted this as a distribution strategy. Now, the battle is who can succeed best on an aggregator platform, not whether or not you can resist it.”

He says he was shocked by how consumer champion Which? slammed aggregators in its report, but adds he investigated any price differences immediately.

“I was surprised that Which? didn’t give credit to the industry for the difference it has made to a sector that was difficult to access, and where millions of people have saved money as a result,” he says. “I would have thought that as a consumer champion, Which? would have said, ‘what a fantastic job price comparison sites have done’.”

Aggregators have been around for less than 10 years, but Hood believes they have established themselves as an integral player in the insurance market.

The next step for aggregators, he says, is to address default excesses. Customers often don’t realise that they can choose a smaller excess on a policy, but Hood believes they’re getting savvier.

“We have certain value-based providers that offer cheaper prices but display higher compulsory excesses and customers are not choosing them. Customers are making that trade-off,” he says. “We try to make sure the level of excess you have is very clear. Part of it is education. We publish a lot of material on the site and through our press releases, which gives consumers guidance on what the differences are between products.”

Meanwhile, Hood believes that the technology that links up insurers and comparison sites is working well. But he says technological advancement is still needed to enable customer portfolios on aggregator sites. For example, he says, people should be able to recall information from previous quotes or update quotes due to any minor changes in their personal lives.

Another issue for Hood is the unsustainable level of aggregator spending on advertising. He believes that some comparison sites are trying to squeeze competitors out of the market in the race for limited market share.

“Being early in the market, you have people who’ve had a good experience and are coming back. It’s very hard for later entrants to replicate that and take them away – they have to spend more money to do that,” he says.

“I was surprised that Which? did not give credit to the industry for the difference it has made to a sector that was difficult to access, and where millions of people have saved money as a result.

Carlton Hood, Confused

There’s obviouosly a lot on Hood’s plate. But he believes his past experiences will serve him well.

Originally from Evesham, Hood studied English literature at Oxford and then completed an MBA in France. He went on to work for Boston Consulting Group (BCG) as a strategy consultant.

Old Mutual was a client of BCG, and Hood ended up moving to Cape Town in 1998 to work for the assurer. Hood excelled with Old Mutual, which had a history of more than 150 years as a South African-based mutual society prior to its public listing in 1999.

He started as a personal assistant to the managing director, and then became the company’s youngest ever general manager as head of e-commerce in 2000. He moved into a strategy role that included becoming head of marketing, and was named to the management board.

But it was during1999, when the company demutualised, that Hood witnessed a process of democratisation first-hand, when Old Mutual’s customers – most of whom were black – were given shares.

“It was a country where a piece of history was happening, and I got to be an observer,” he says. “I’ve had dinner with Desmond Tutu and lunch with Nelson Mandela as a board member of the Old Mutual Foundation charitable trust. We talked about what had inspired them, and whether they fell into leadership accidentally. It was an inspiration and a business challenge.”

He’s finding there are stark differences between working in the insurance market in South Africa and the UK. South Africa, which has a population of around 43 million, is a middle-income, emerging market with a well-developed financial sector.

But Hood says one of the major challenges was that only about one fifth of the South African population is economically active, and the country has 11 official languages. There is high mortality there and the main policy people took out was funeral cover. There was also a large economic gap between blacks and whites.

In terms of insurance, Hood believes the UK is homogenous by comparison.

One of the reasons Hood decided to return to the UK was because he missed his family, who still reside in Evesham. But he also misses South Africa.

His partner, Gavin, is from South Africa. Gavin’s family owns a wildlife lodge and Hood fondly recalls a visit to the lodge during which he was told to get indoors to avoid an angry pregnant hyena.

He’s thankful that Gavin has moved with him to Cardiff. In fact, it seems Gavin – a former chef and business owner – might be settling into Cardiff life more quickly than Hood, as he’s working on an organic farm.

But Hood says he gets his city fix by travelling to London every other week on behalf of Confused.

Andy Leadbetter, acting managing director, Moneysupermarket

Lingering arthritis pain in his left hand is a reminder of another job and another life for Andy Leadbetter.

After finishing his accounting and finance degree at Liverpool University, he spent 10 years in the Royal Navy, working as a navigation officer and in defence intelligence.

His career came to an abrupt end when he had his hand crushed between a patrol boat and a larger ship. He wasn’t allowed to return to sea due to the steroid medication he was given for his hand.

That twist of fate resulted in the Navy paying for Leadbetter to complete an MBA at Liverpool University, which he says enabled him to make a successful leap to civilian employment.

“It was the most valuable thing I ever did. I’d never have been in a position to be considered to have the appropriate skills to move into insurance without the MBA,” he says.

His first position was with Swiftcover, where he worked in product development and IT. He joined Moneysupermarket in October as head of motor and home insurance, and became acting managing director when Richard Mason resigned in May.

Mason was well known for his strong opinions against anti-aggregator direct insurers and those calling for more regulation. He was one of Moneysupermarket’s original employees and had been there for eight years.

“Bringing in new blood can really reinvigorate a business, and we are looking to make some key appointments over the coming months. This will give a clear intent of the direction we are going in.

Andy Leadbetter, Moneysupermarket

After resigning, Mason said he had been offered several jobs from insurance contacts and competing aggregator sites, but wanted to take some time off to spend with his family. He said he felt ready to leave after Moneysupermarket had surpassed Confused to become the biggest motor insurance price comparison site in the UK.

Leadbetter knows he has some big shoes to fill, and admits his new position has been challenging with a lot of extra hours. But he says his Navy training and MBA have prepared him well.

“My experience gave Moneysupermarket confidence in the broader range of skills that I have,” he says. “A lot of skills from the Navy were transferable, and the MBA gives companies confidence that you have business skills in different spheres. Although I’d learned all those skills in the Navy in the different positions that I’d had, I didn’t have the piece of paper with a qualification that you’d have in a civilian company.

“A lot of people don’t really understand what the armed forces do now, clearly because it’s not at the front of people’s minds. People just think you’re a killing machine, when you’re not at all.”‘

Leadbetter says that while there are many hopeful entrants to the comparison site market, he doesn’t believe they are a major threat.

He says: “Anyone could set up a price comparison site tomorrow. But the most difficult thing is to drive cost-effective traffic to the site. They can’t acquire it because the marketing spend of all the major comparison sites make it extremely difficult for any new entrant to gain significant amounts of traffic. That is the barrier to entry at the moment.”

Meanwhile, Leadbetter says there are plans for Moneysupermarket to strengthen its own position by entering new markets. But he remains tight-lipped on the details.

He adds there is a plan to hire several people: “Bringing in new blood can really reinvigorate a business, and we’re looking to make some key appointments over the coming months. This will give a clear intent of the direction we’re going in.”

As for the recent scrutiny that aggregators have come under from Defaqto and Which?, he brushes it off.

“The sector’s still very embryonic but we’ve made significant improvements compared to when insurance price comparison started a few years ago,” he says. “Given the size of the market at that time, the companies didn’t have the resources in order to invest in some areas.

“But if you look at what our site has done this year, it’s by far the most comprehensive in what we offer consumers. For example, you can compare five different products side by side, and we also enable user reviews to be posted.”

In its interim results released two weeks ago, Moneysupermarket reported that its revenues had increased by 27% to £99.4m versus £78.5m for the same period last year. Internet revenues rose by 30% to £95.3m from £73.5m.

Visitors to the group’s websites increased 39% to 62 million, and transactions increased 37% to 39.6 million.

It also announced a maiden interim dividend and a policy on dividend increases. Second-half revenue growth is expected to be solid but slower than the first half.

Hayley Parsons, managing director, Gocompare

Unlike her counterparts, Hayley Parsons has been involved in price comparison sites since day one.

Prior to starting up Gocompare.com in 2006, she was head of business development at Confused.com, which she co-founded. She has 18 years’ experience in the insurance industry, having begun working for a local broker straight from school.

She later worked for Admiral where she impressed Kate Armstrong, who was one of the insurer’s founding directors. In 2000, Armstrong asked Parsons to help build Confused.com.

Initially, Parsons was unsure. But she says she has no regrets and became best friends with Armstrong in the process.

“It was a strange move really as it took me out of my comfort zone. But I think it was just the opportunity of having to prove a whole new concept that sounded exciting and persuaded me.”

Soon after Confused was launched, Moneysupermarket joined the fray and the pair of companies became the dominant players in the market. But when Armstrong stepped down in order to spend more time with her family, the office didn’t feel the same for Parsons and she decided to branch out on her own.

“Comparison sites have changed the distribution model and they are a great invention for consumers. They are also a great invention for the insurers that embrace them, but they have definitely kept rates down.

Hayley Parsons, Gocompare

She recognised that at the time, price comparison sites were purely driven by price alone, and she wanted to try to change that. “I felt very strongly then that it needed to change. So I woke up and thought, ‘it’s time to move on, it’s time to change this,’ and then left within a month.”

She believes this goal has been achieved: “One of the things I am most proud of is that the rest of the industry has had to catch up with us and move on. Now, most of the major comparison sites are product-focused, not just price led.”

Following the reports from Defaqto and Which?, Parsons does admit aggregators don’t address all customer needs. But she says: “Customers still need to do a bit of research and need to take notice of the results. Our job is to lay out all the results for the customer to help them make the right choice. It’s not our job to tell them which policy to buy.”

She also believes that Gocompare, Moneysupermarket and Confused stand far above the competition.

The others, she says, don’t have the traffic and volume in relation to the big players, so there’s a big gap.

Comparison sites have come under steady fire since they first arrived on the insurance scene. But most insurers and brokers have realised that if they can’t beat them then they should join them.

But Parsons acknowledges the role that aggregators play in driving down rates, which is particularly worrying for insurers suffering the effects of a soft market.

She says: “Comparison sites have completely changed the distribution model and they are a great invention for consumers. They are also a great invention for the insurers that embrace them, but they have definitely kept rates down. Some insurers would argue that retention rates are slightly lower.

“However, insurers get the business in a much more cost effective way. So what you find in recent years is that insurers have actually pulled away from their spend on their main TV advertising.”

Gocompare has even managed to endear itself to Biba, which welcomed it into membership. This was a major deal because Biba has often been critical of aggregators. But the association said Gocompare’s philosophy of comparing insurance products on their suitability to individuals’ requirements as well as price is aligned with its own calls for clear and fair information for consumers.

Parsons says: “Biba came out with some comments on the price comparison site market and I was a wee bit up in arms about it because a lot of its criticisms were a lot of things I personally had spent the last year trying to combat. So I met [Biba chief executive] Eric Galbraith and we actually shared a lot of the same views. Biba appreciated what we’d tried to do and the way we did business and understand the insurance market.

“It just made sense then to team up and start working on things together rather than fighting with each other. I wish the industry generally would start thinking of us as an insurance industry, rather than separate distribution channels. Brokers have always been a major part of our business and always will be, and being a member of Biba allows us to be at the forefront of our industry and be aware of all the major issues.”

She adds that more than 70% of Gocompare’s partners are brokers, which now have access to over one million quotes per month.

Parson warns that smaller brokers would need the right rates and products in order to be competitive, and they would also need customer service and staff in place to cope with the potential volume.

She adds: “If you look at the launch of Direct Line in 1985, that was supposed to be the death of the broker but it just didn’t happen. Brokers are here to stay; there will always be broker operations as there will always be consumers who want to walk into a high street broker and transact their business.

“But I think that brokers have been very slow in adapting to change and different distribution models. Certainly the brokers who embraced the price comparison sites in the early days are now reaping the rewards and are most certainly singing our praises.”

Looking to the future, Parsons says Gocompare plans to take more of an interest in customer feedback.

She’s still scratching her head over how to implement commercial lines. “Last year, Direct Line started a campaign on commercial insurance and people are starting to try to get commercial insurance online. But I think we’re still a few years away from any aggregator actually successfully launching something on their website,” she says.

She believes eventually the internet might be able to cater for simple standard commercial insurance. But the more complicated products will likely still require a human touch. Also on the agenda for Gocompare is building up its home insurance presence. Like its competitors, motor has been the dominant insurance so far. But home is considered the next big growth area.

At 34 years of age, it’s impressive how much Parsons has already accomplished. And while she’s keen to take aggregators to the next level, it’s still nice to take a breath and look back at how far the industry has come in such a short time.

“I’m very proud of the aggregator market as whole,” she says. “We have certain strong principles such as we don’t have any advertising on our site, we like our site to be totally driven to the consumer. Our main focus is the customer and that can differ from other sites.”