Source: Yahoo7 - Finance
Written By: Ross Kelly

German insurer Allianz has dramatically undercut the local life insurance market with a direct-to-customer, online offering that it says is cheap and simple enough to help fill Australia's underinsurance gap.

Allianz Australia said that for a male non-smoker, its new products were more than 20 per cent cheaper than the average product distributed by financial advisers and 35 per cent cheaper than the average product sold direct via phone or internet.
 
Most life insurance, which includes death and injury cover, is sold through intermediaries such as financial planners who mostly charge commissions.

Local competitor CommsInsure, owned by the Commonwealth Bank of Australia (ASX: CBA.ax) , responded by telling AAP that it would consider offering online life insurance next year, but won't be "dying in a ditch over it".

Only a handful of companies in Australia such as Alliance, ING and Suncorp offer life insurance directly online or over the phone.

Online insurance has traditionally been even more expensive because checks and balances in the underwriting process are kept simpler - making the insurer exposed to a broader range of claims.

But Allianz says online insurers can afford to lower their prices, and are keeping them high to protect their advisory channel.

"There's a whole lot of incentive for them to do that because the majority of their sales come through those intermediaries," Allianz Australia chief executive Jonathan Poole told journalists.

"We're not saying that financial advisers don't offer a valuable service, they obviously do.

"But for a lot of Australians it's a service that they don't need."

CommInsure chief executive Simon Swanson said it was hard to compare insurance offerings based on price because not all offerings were the same.

"A Volkswagen is much cheaper than a Mercedes," he said.

Mr Swanson said the online insurance market in Australia remained small because people usually gravitate towards life insurance if it was sold to them.

"I don't know about you, but when I woke up this morning I didn't actually think about buying more life insurance," he said.

Allianz will launch an advertising campaign for its new products that includes television commercials, on Sunday.

Its move mirrors similar steps taken by Tesco Plc in the UK where the retailing giant has won a significant share of the life insurance market through direct sales.

Mr Swanson said CBA was considering offering online life insurance.

"We'll get into that in the new year, but we're not going to die in a ditch over it."

Allianz will offer a maximum of $1.25 million in death cover over the internet and claims to be the first in Australia to offer critical illness and disability cover online.

It has also flagged briefer but still comprehensive injury definitions, and product disclosure statements of seven pages - much smaller than the 30 to 90 page offerings of its competitors.