Aldi joins Coles and Woolies in selling insurance, as the battle for shoppers’ cash spills beyond the aisles
By Claire Heaney
Not content with shaking up supermarket shopping through its famous “aisle of shame”, ski gear and knock-off Wagon Wheels, Aldi is now dipping its toe into insurance.
The industry is watching with interest to see if a combination of cost-of-living pressures and Aldi’s reputation for no-frills value can convert into household, car and landlord insurance policies.
Big brands Coles and Woolworths – with a grocery store market share of up to 70%, according to IBISWorld – have been in the insurance mix for some years.
Australia and New Zealand’s largest general insurer, IAG, is behind the white label Coles home, landlord and car insurance, while Guild Insurance underwrites its pet insurance.
Hollard Insurance backs Woolworths Everyday home, landlord and car covers. Pet insurance is underwritten by PetSure and travel insurance by Nib.
Now Aldi has a distribution agreement with Honey Insurance, underwritten by RACQ Insurance, for home and contents, car and landlord covers.
Aldi Insurance launched in a blaze of publicity in June, garnering money-can’t-buy free media coverage.
For those considering its offer, a further selling point is a free smart sensor home kit valued at $250 for eligible home and contents policyholders.
Three small sensors are placed strategically around the house to warn of often avoidable mishaps. If you leave the bath tap running, the sensor will tell you via an app on your smartphone that water is overflowing and could lead to damage and an insurance claim. Aldi promises customers with activated sensors will save up to 8% on their premiums each year.
Its Australia group director Rodney Balech says the move into insurance expands the supermarket chain’s “good different” offering.
“We know that Australians have been calling for a trusted insurance provider that not only provides a reliable and accessible service but also doesn’t break the bank,” he says. “With the launch of Aldi Insurance, we’re bringing our expertise in competitive pricing and quality products to the insurance vertical, while partnering with Honey’s tried and true insurance experience to give customers confidence in the products.”
He says Aldi will not be offering one-off rewards or conditional discounts.
Coles and Woolies offer a range of policies with ongoing and temporary discounts linked to multi-policies and their respective shopping loyalty programs. Coles offers bonus Flybuys points worth up to $60 per policy per year, excluding third-party insurance.
IAG’s executive general manager for partners and platforms Luke Boyle says the group bought the Wesfarmers insurance underwriting business in December 2013 and inherited the Coles partnership.
“IAG has a long history of partnering through our brands, forging alliances with like-minded organisations that align with our purpose ‘to make your world a safer place’,” he says. “Brands seek to partner with us due to our general insurance expertise, while enabling them to deepen relationships, trust and loyalty with their customers through expanded service offerings.”
“People are inclined to rely on and trust Aldi. There is a risk, if anything goes wrong, that it will bounce back on its brand.”
Professor Harmen Oppewall
He says savings generated through brand reward programs are valued by customers facing cost-of-living pressures.
“Our partnership history illustrates the importance of strong organisational alignment and team culture, both seen as fundamental to consistently delivering tangible value for stakeholders.
“As digital capabilities continue to mature across the Australian marketplace, we see embedded insurance as a future avenue of partnership growth, where businesses will be able to easily connect to and access part of the insurance value chain.”
Mr Boyle says IAG recently trialled embedded technology in a partnership with Driva Finance, integrating a motor insurance quote as part of a loan offer.
People taking out Driva Finance loans are required to have cover.
“Our ongoing investment in partnering and innovation helps us to expand our reach, while providing assurance to our partner members and mitigating risk in their lives,” Mr Boyle says.
Woolworths Everyday Insurance is linked to its Everyday rewards card, and policyholders can get discounts on their shopping. Woolworths’ website says it has sold 300,000 pet insurance policies. Hollard Insurance declined to speak about the partnership.
Aldi is promising no jargon, no hidden exclusions, a quote in three minutes and monthly payments without extra cost. It also says fees won’t jump after the new customer honeymoon.
“We looked at our home and contents insurance model and, like the rest of our business, really evaluated ways we could make the product more affordable for customers while not compromising on quality,” Mr Balech says.
“Aldi doesn’t have loyalty programs, but it does understand its customers. The one thing Aldi has been able to do is to gain the trust of the Australian consumers.”
Professor Gary Mortimer
“The use of technology like smart sensors in homes is an innovative way to bring down premiums by reducing the risk of unfortunate mishaps in the home that our insurance protects against.”
Honey Insurance founder and chief executive Richard Joffe says partnering with Aldi is a natural fit given their shared desire to bring a more trustworthy and straightforward insurance product to Australian customers.
Honey also has partnerships with the Bank of Queensland, AGL, Metricon, Harvey Norman and McGrath Real Estate.
The Aldi move comes as the Coles and Woolworths duopoly is taking a hiding in the publicity stakes, as a series of inquiries question their market strength and the power imbalance between supermarkets and suppliers.
Aldi was named supermarket of the year in Roy Morgan’s Customer Satisfaction Awards last year, claiming the title for the seventh time and for the fourth consecutive year.
In June, consumer magazine Choice found the average basket of groceries at Aldi cost $51.51, about 25% less than at Coles and Woolworths. There was only 1% difference in prices for Coles and Woolies.
Since launching in Australia in 2001, German group Aldi has opened 580 stores, but has no presence in Tasmania or the Northern Territory.
While people seem to like the “good different” approach of Aldi – despite having less choice, self-packing madly while trying to keep up with the cashier, and paying a fee for card use – will insurance be attractive?
Many people let their insurance tick over without shopping around, meaning they may pay a “loyalty tax”, but as the cost of living bites they might be up for a change.
Monash University marketing professor Harmen Oppewal says there is an opportunity for Aldi to build on its brand.
He says the chain has positioned itself as offering value for money and as a trusted brand, and shoppers see it as having limited but reasonable choice.
He says Coles and Woolworths have been in the news in a “less positive way”, which has only enhanced Aldi’s image.
“People are inclined to rely on and trust Aldi,” he says. “There is a risk for Aldi, if anything goes wrong, that it will bounce back on its brand. It takes a risk that must be managed.”
Queensland University of Technology advertising, marketing and PR researcher Gary Mortimer says Aldi Insurance is an extension of supermarkets moving into products such as a mobile phones and plans.
He says the chain has registered trademarks for travel, internet and energy, and insurance is part of a bigger play to vertically integrate the business.
Professor Mortimer says supermarkets have millions of shoppers come through their doors every day and need to think of ways to sell more to them. For example, they know their customers have pets and are buying pet food, so they offer pet insurance.
Coles and Woolies are mining their loyalty scheme data to learn more about their customers and how they can sell more to them, he says.
“Aldi doesn’t have these programs, but it does understand its customers. The one thing Aldi has been able to do is to gain the trust of the Australian consumers. No one knew Aldi [before]. It did not have the range and had brands we had never heard of.”
He says people understand that they get quality at low prices at Aldi, and they will apply that knowledge to other products.
“That is how they nail trust, first through our groceries. They have not done it overnight,” he says.
