Virgin Money has teamed up with Tower Australia to launch a new life insurance product it believes will expand an industry with an untapped well of new consumers.
The announcement comes as one expert says the market is ripe for new players and Virgin is well-set for growth, with recent figures showing only 16% of Australians are signed up to a type of life-insurance product.
Virgin Money managing director Matt Baxby told SmartCompany its new insurance product will launch in early 2011, and is part of the company’s plan to compete with the existing Australian financial and insurance markets.
“The key thing for us is that we looked across the Australian market and life insurance jumped out as a reason opportunity. That’s built off a lack of insurance among Australians.”
“There are a few other reasons we went into this space. If you’ve ever been through it, you know there is a lot of paperwork, a lot of complexity in opening a new product. We think there’s an opportunity for making it easier and more accessible for people.”
Baxby also said the company will aim for a broad appeal at all ages, saying the Virgin brand is well-set to cover five million existing customers.
“The brand has broad appeal, and I think we offer a lot of value for a range of demographics. Once a person is a Virgin customer they’re very open to receiving more information about Virgin products.
Tower said in a statement the agreement between the two companies will last for an initial period for seven years, with the option to expand, while the impact of underlying profit and EPS in 2010-11 is expected to be “negligible”, then increase during further years.
The venture is being funded by the company’s recent rights issue, managing director Jim Mento said in the statement. Tower will handle the finance and infrastructure, with Virgin lending its brand to the new products.
Both Virgin Money and Tower were contacted for comment by SmartCompany, but were unavailable for comment before publication.
While no further details were given regarding prices and product types, the Virgin brand is usually associated with lower than average fees and rates.
Earlier this year Tower reported underlying profit for the six months to May was up 4% to $39.9 million, with reported net profit up 5% to $28.4 million. At the time, Minto said the company was performing well in an underinsured market and “more people are recognising the value life solutions bring to them”.
Canstar Cannex head of wealth management Stephen Mitchell says the market needs new products and Virgin Money is well-set for growth.
“There has been growth in the life insurance market, as consumers want to secure their investments. There are life insurance players like Tower moving forward into growth stages.”
“The growth in life insurance markets sense given that whenever there is a downturn in investments, there is growth in life insurance. Mum and Dad investors want to protect the mortgages, their education and their future.”
Canstar recently released figures revealing only 16% of Australians have life insurance. He says the market is hungry for new types of life insurance products, saying demand is high for any types of products that secure income and investments.
“We’re more inclined to insure our cars than our lives. The more players in the market the better, and the more consumers there are the better. Virgin Money has a big market to tap into and it’s something consumers have to understand how it works and how important it is.”
The latest product comes just a few months after Virgin launched its new headquarters in Sydney, promoting a new joint venture with Citibank to offer credit card and online banking facilities. The company is also expanding its superannuation business.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
