The big food retailers have had some success in selling personal lines products instore. Now they are seeking to go further. Michael Faulkner explains

The past decade has seen supermarkets muscle in on the personal lines sector. With retail giant Tesco in the vanguard, other retailers have fallen in behind, with the John Lewis Partnership, through its Greenbee brand, the most recent entrant.

And their penetration of the market is growing. Data from the ABI reveals that 13% of motor insurance in 2006 was sold through retail and affinity groups, including supermarkets. In 2000, this figure was only 2%.

In home insurance, 16% was sold through retailers and affinity partners in 2006, compared to 2% in 2000.

Market leader Tesco Personal Finance now boasts over 1.3 million in-force car policies and 400,000 home insurance customers. Last year it launched its own aggregator site Tesco Compare, evolving the supermarket distribution model even further.

In 2008, the supermarkets are looking to extend their insurance businesses even further. And with the downturn in high street sales, financial services, particularly general insurance, is likely to become more important for them.

The strength of supermarkets in selling insurance has been in their marketing ability. “Supermarkets are good at lead generation. It is difficult to avoid exposure to their messages in store,” says an affinity specialist at a major UK insurer. “They have high footfall levels into their stores and low acquisition costs.”

Supermarkets are good at retailing – whether its battery-farmed chickens, beans or policies – after all that is what they do. The challenge for supermarkets is converting the insurance leads, whether sourced through stores or the internet, into sales.

For supermarkets, price is king. Most supermarkets’ sales pitch is based around cheapness and insurance is no different. “For supermarkets, it comes down to price competitiveness. The product [insurance] is very price sensitive,” says the affinity expert. “They have had more success on motor than household, given the complexity of household and the fact it is tied into the mortgage lenders.”

The insurance products sold by supermarkets tend to have standard features, although Marks and Spencer is noted for its feature rich household product, and John Lewis’ Greenbee offers a higher end household product in addition to its standard policy.

Even the more upmarket retailers, whose customers are not necessarily looking for the cheapest product, acknowledge that price is important. Supermarkets want to be able to offer cover to as many of their customers as possible. They don’t want to turn people away because they are too young, too old, in the wrong car or the wrong postcode; they want to have the widest possible risk footprint from their underwriting partners.

Create tensions

But the desire for inclusivity, coupled with their desire for a cheap premium rate, can create tensions with their insurer partners, whose risk appetite may not be so wide.

Asda provides a case in point. The supermarket originally used Norwich Union (NU) as its lead insurer for its motor and household products (it operated a panel for business that NU did not want to quote for).

When NU began putting rates up for certain risks Asda moved to a panel of insurers for all business as keeping premiums cheap was important.

Gev Lynott, financial services director at Asda, says: “NU had a different strategy to us. When it started putting rates up in certain regions we didn’t want that. NU will be the lead insurer [on the panel] but it will only get the business it wants.”

Asda has a panel of 27 insurers for its motor insurance product, and 20 insurers for its home product.

Lynott says: “Since we moved to a full panel in July 2007, we have seen a real improvement in terms of business growth and conversion rates, and average premiums have dipped.”

“A supermarkets’ sales pitch is based around cheapness and insurance is no different

He adds: “We will look at a panel option if a single insurer is not the best price. Having seen how it worked in motor and household we will look at other options.”

Asda’s pet insurance product is underwritten by Allianz and its travel offering is underwritten solely by NU.

One of the key challenges for supermarkets growing their insurance businesses is to attract customers beyond their core shoppers. The supermarkets claim to be able to do this.

Greenbee says it has a “significant proportion” of customers who are not core John Lewis customers. Greenbee managing director James Furse, however, says brand awareness is less of a priority for 2008 than raising customers’ understanding of the insurance products.

“We don’t want to over-promise and under-deliver. We are not looking to accelerate growth through a huge upper line brand campaign,” says Furse.

Asda also says it has been able to attract a “broad spectrum of people [to its insurance products], not just Asda shoppers”.

But it wants to increase its profile online and in stores, and position itself higher on the lists of insurance providers. “The challenge is to do this cheaply; we don’t have the money of the big boys,” says Asda’s Lynott.

Brand stereotype

One challenge for the supermarkets in extending their brand is customers’ willingness to buy insurance from them. The affinity expert says: “I don’t think they have a problem getting their brand across to new customers. The question is whether people are happy with the brand.”

The brand’s stereotype, he says, may put off some customers.

Tesco, with its dominance of the grocery sector and huge marketing budget, has been successful in developing a high profile for its insurance products. And the launch last year of its own aggregator site Tesco Compare has moved it way ahead of the competition.

Not only can it sell its own insurance products, but it can make money from business going to rival brands. It also serves to link its brand with other companies’ products and assist in increasing the inclusivity of its insurance brand – it can always offer a cheap quote even if it’s not its own.

Catherine Barton, insurance partner at Deloitte says: “Tesco is doing well. It has the highest profile. It has grown enormously, particularly on the motor side. It is trying to differentiate itself through Tesco Compare and its value motor product.”

So what does 2008 hold for the supermarkets in the insurance sector? Barton says raising brand awareness is key, particularly in motor insurance. But she warns that the growing presence of aggregators in the sector could hamper some supermarkets’ effort to develop their insurance brands.

“If they don’t already have market share it will be difficult to raise their market profile.”

The affinity expert says it would expect the supermarkets to increase their focus on their insurance businesses given the downturn in consumer spending on the high street.

Which insurers are taking the risk?


(Tesco Personal Finance is a joint
venture between Royal Bank of Scotland and

Car UK Insurance

Home UK Insurance

Pet UK Insurance

Travel UK Insurance

Health AXA PPP


Motor and household panel of
insurers managed by BDML Connect

Pet Allianz

Travel NU


(M&S Financial Services is a
subsidiary of
HSBC Bank)

Travel AXA

Home and
contents NU

Car panel broked through Budget (BSIL)

Pet R&SA

Wedding Ecclesiastical


(Provided by Greenbee, the direct services company of John Lewis

Home AXA

Specialist Home Sterling Insurance

Travel AXA


Wedding and event cover AXA


Home and contents St Andrews Insurance


Car esure (part of HBOS)

Travel administered by Halifax General Insurance Services and underwritten by St Andrews Insurance