Supply Of Substitute Is Low Within The Insurance Market As A Whole

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Threat of substitute is low within the insurance market as a whole. Whilst there are little to no switching costs for a customer of insurance products there is no other immediate market that a customer can purchase a product from to satisfy their need for risk protection, and therefore no substitute product is available in the industry, however there is a high threat of substitutes in parts of the individual value chain as companies try to disrupt the market. Aggregators are a threat of substitute for distribution channels, with companies such as “iSelect” starting in Australia. Overall, competition in the GI market is high and seems to be increasing. At present the main differentiators that competitors are trying to leverage are Price,…show more content…
This is clearly a resource that is valuable, rare and in-imitable. The second source of competitive advantage, one which is an also provides PIC opportunities, is customer data that is held by the CBA group. Currently CBA has over 11 million customers (Pash 2015) that interact with the group and with this come a lot of data about an individual’s spending habits. The advantage for GI is that profitable insurance is about risk selection and the more data that you analyse; the more you can determine the risk that a person brings. In a market with a relative commoditised product, differentiating on individual risk profiles is a source of advantage that is difficult for competitors to imitate. A recent report from PWC (2014) showed that insurers need to avoid competing solely on price and highlighted the power of using data to gain a competitive advantage. The capability of Advanced Analytics is already held within the group but new capabilities are required that leverage this
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