Hibernian Insurance has signed a strategic agreement with Premier Direct, the Bank of Ireland owned telephone-based insurance operation. Under the agreement Hibernian will supply and underwrite all Premier's insurance business. The move will give Hibernian an opportunity to increase significantly its share of the motor insurance market and could make the company the second largest in the market after Guardian/PMPA. Premier has about 4 per cent of the Irish private car insurance market, while Hibernian currently has about 13 per cent of the total motor insurance market. As Premier customers renew their motor policies Hibernian will be able to quote for the business which is currently with the Cornhill insurance company.
The agreement will come into effect in January 1998 when Hibernian will replace Cornhill as the insurer for Premier private motor business. Premier Direct was set up by Bank of Ireland in January 1994 to sell motor insurance to customers by telephone. At that time it entered into a strategic agreement with Cornhill which supplied the products and took the risk involved from claims on policies. Premier is an insurance agency or brokerage rather than an underwriter of the business - earning commission income on sales - while Cornhill supplied the product and took the underwriting risk. Premier has about 4 per cent of the Irish private motor market and, with 35,000 customers, would be one of the larger direct operators in the market.
Mr Cathal Muckian, of Premier, confirmed the company has entered into an arrangement with Hibernian. Mr Muckian declined to comment on why Premier has changed its strategic partner after three years. But market sources suggested that Premier may have been looking for a partner with significant scale in the market. Cornhill is a relatively small player in the Irish motor insurance markets with a share of about 2.5 per cent.
A spokesman for Hibernian confirmed the agreement, stating that his company was "very pleased have reached agreement with a big intermediary like Premier". Hibernian is confident that significant numbers of Premier customers will renew their motor insurance with Hibernian, he said.
The agreement adds another distribution channel for Hibernian which already sells through brokers and its branch offices. "Customers want the opportunity to deal through different channels and we have to be able to offer what the customer wants. The phone is an attractive channel for motor business. We plan to grow this business with Premier," he said.
The spokesman added that distribution through brokers will remain an important part of Hibernian's strategy, "particularly for more complicated products". Premier was one of the early entrants into the Irish direct insurance market. But the other telephone-based direct companies in the market - Guardian Direct, First Call Direct, Celtic Direct, Touchline (now owned by Eureko which owns Celtic), and Quinn Direct are all underwriters who market the insurance product and carry the risks involved as well as selling it.
Some market sources say the direct market is now oversupplied where newer entrants are finding it hard to build market share. Advertising costs are high as companies try to target potential customers in selected market segments. Premier is expected to break even this year after extensive investment in technology in the first and second years of operation. But Mr Muckian said that the agreement with Hibernian will mean further significant investment in new technology to position the company for long term growth
He declined to discuss market targets. But he commented: "We are in the business to stay, we are here for the long term. We would not have done this deal if there was not significant long term potential."
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