First Direct has launched an online car insurance service.
First Direct, the HSBC-owned UK direct bank, has launched an online motor insurance service through its website firstdirect.com. The insurance service was originally launched in 2000 as a phone offering. Over the next few months, it will also start to offer household and travel insurance. At present First Direct has a panel of nine insurers, including Norwich Union, Royal & SunAlliance and AXA; it selects the five most competitive quotes obtained.
It’s a volatile time to enter the online motor insurance market. The market is overcrowded and highly competitive, typified by high customer churn and very low quote-to-purchase conversion ratios. This has resulted in limited revenues for online insurance services and will likely lead to a shakeout of motor insurance websites. On the other hand, motor insurance is one of the most popular financial services items on the Internet. Clearly, this growth potential has fuelled First Direct’s decision.
The success of the service will be more dependent on whether consumers take up online financial services than on First Direct’s product sophistication. At present consumers are reluctant to buy financial products online, due to security concerns over entering credit card and personal details onto the Internet. However, First Direct, as a trusted provider, is well placed to take advantage of burgeoning consumer confidence.
Of course, it also has the financial backing of HSBC to survive the competitive environment if losses are sustained, as well as experience in motor insurance services gained through its telephone insurance arm. In addition, it can cross-sell its online insurance services to its established online banking customers. Another key advantage is that First Direct is acting as an aggregator, offering a range of quotes – much more likely to please consumers than direct insurers who only offer one.
First Direct will not initially make a significant impact on the online motor insurance market. However, it is in a very strong position to do so once consumer attitudes have shifted and competitors have fallen.
