With increased competition between supermarkets to gain market share and
improve profitability, the range of products on offer is getting ever diverse.
Now, the big three chains, Tesco, Sainsbury’s and Asda have caught on to the
fact that their brand name can sell just about anything, including of all
things, car insurance.

Car insurance is one of those very boring expensive products that you loathe
having to pay for but have no choice if you want to drive a car on Britain’s
roads. Why therefore would supermarkets want to be associated with such a
seemingly expensive pain in the pocket? Well it seems that the public think it’s
a great idea and are buying it from these stores in their thousands with the
belief that it must cheap if the supermarkets are selling it. The strange thing
is that the companies behind these deals, who are actually underwriting the
risk, are the same companies who have been selling you car insurance for years.

Tesco for example seem to be incredibly successful in selling motor insurance
to their customers with statements proclaiming that you could save up to £150
compared to some leading insurers. Tesco of course is not an insurer. If you
look closely at the bottom of the Tesco car insurance webpage, you will notice
it says that the policy is provided and underwritten by a company called UK
Insurance Limited. Who on earth is this company you may ask. UK Insurance
Limited is part of Royal Bank of Scotland who also own Direct Line along with
Churchill and Privilege.

Sainsbury’s state that you could save up to £165 on your car insurance
compared to other leading insurers - £15 better than Tesco. Of course, like
Tesco, Sainsbury’s is not an insurer either. A quick look at their webpage shows
that policies are arranged and administered by Esure, who are part of the
Halifax Bank of Scotland group. Maybe Sainsbury’s are about to swap Jamie Oliver
for Michael Winner – maybe not.

Asda state that they give you the “very best possible insurance protection”
and offer a 10% discount if you buy online. Of course, just like Tesco and
Sainsbury’s, Asda is not an insurer. Asda have opted to team up with Norwich
Union to provide their policies.

The insurers are desperate to get into bed with the Supermarkets. It enables
them to dress up their car insurance product with an already well known and
trusted brand name. This is good business and a smart way to gain lots of new
customers very quickly. Ironically though, some of those ‘new’ customers may
already be with that insurer. Without knowing it, they may end up cancelling or
not renewing their existing policy but staying with the same insurance company
via the cheaper supermarket option.

From a customer perspective, the upshot of all this will hopefully be to get
Cheaper Car Insurance, which at the end of the
day is what everybody wants. Who the insurer is behind the deal is probably not
of great concern to people. In the long term, whether the actual underwriting
results of these deals are profitable enough for the insurers to continue to
offer the supermarkets good rates for their customers, will be interesting. One
thing is for sure, I don’t see Direct Line advertising bananas six for a pound
anytime soon.