BGL Group also operates a product business model, distributing insurance through its brands on price comparison sites including its own.
BGL Group owns the comparethemarket.com, one of the most popular price comparison websites in the UK for vehicle, home, and life insurance policies, money products, and utilities. Through Comparethemarket.com, BGL Group matches consumers (buyers) who search for insurance policies or service contracts, and utilities providers (sellers) who offer their products. The comparison site platform reduces the search costs for consumers shopping for policies and contracts, by aggregating and objectively comparing available options, while reducing customer acquisition costs for sellers by taking on the burden of marketing.
Although BGL Group’s other business model is product-based, in which their brands distribute insurance products underwritten by third-party companies, the fact that these products are predominantly marketed to customers via price comparison sites indicates that the matchmaking business model is the dominant one.
As BGL Group is not publicly listed and not obliged to disaggregate its financial reporting, it is not possible to determine the distributions of revenue among its various subsidiary companies being generated by the respective business models.
BGL Group is based in the UK and was founded in 1992 as the Budget Insurance Company. BGL Group is owned by BHL (UK) Holdings Limited, and the Canada Pension Plan Investment Board (CPPIB), who took a 30% stake for approx. £675M in November 2017. The company grew incrementally over time with an early focus on competitive insurance pricing in digital markets. The group’s most notable brand, Comparethemarket.com, was launched in 2004 and given its iconic meerkat figurehead in 2009.
BGL Group joined the unicorn club (i.e. startup companies that had succeeded in growing and attracting international investments) in 2017, following a valuation of $ 3 billion. Currently, the company employs around 3300 people and registered 6.5m comparethemarket.com customers in 2018, up 16% from 2017. BHL (UK) reported 2018 profits of £100.3m on revenues of £694.5m, up from £75.9m (+32%) and £626.3m (+11%) respectively in 2017.
BGL Group has two main customer groups: consumers (buyers) who search for insurance policies or service contracts on the price comparison websites, and providers (sellers) who offer their products there, either directly or via branded intermediaries and distributors.
Learn more about the Matchmaking Business Model
You identify two or more customer groups and brings them together in your marketplace.
Engagement — Value Creation Proposition
How BGL Group creates value for consumers (buyers): Consumers benefit from being able to compare the widest possible variety of products on one site.
How BGL Group creates value for providers (sellers): Providers gain direct access to large markets of consumers. Search costs on both sides are reduced by the matchmaking function of the platform, meaning better outcomes of fit in terms of product attributes and customer profiles are obtained. The more successful this model becomes, the greater the incentives for participation on both sides are.
Both buyers and sellers benefit from network effects due to the respective concentrations of each on the matchmaking platforms. Also, BGL Group can use its comparison sites for listing the insurance products it distributes in the market, thereby gaining an advantage over competitors who incur costs for participation on the platform.
Delivery — Value Chain
BGL Group distributes consumer insurance products underwritten by providers through its Insurance, Distribution and Outsourcing Division (IDO).
How BGL Group works for consumers (buyers):
Consumers use the comparison sites to obtain better suited or cheaper policies and ensure that an objective perspective on the available market is achieved without having to research numerous individual insurers.
How BGL Group works for providers (sellers):
For insurance distributors and utility providers, value is obtained from increasing the churn rate of contract customers. The price comparison sites incentivize customers to shop for new policies more often than they would otherwise, due to the prospect of potential savings. The greater the number of transactions completed on the comparison site, the greater the revenue earned.
Monetisation — Value Capture
BGL Group makes money by charging fees to both buyers and sellers. Specifically, buyers can use the matchmaking price comparison sites for free but pay for their contracts directly with sellers once an agreement is signed. Sellers pay fees to the price comparison sites in various formats, most commonly for each signed policy. For utilities and physical product insurance–a flat fee is typically paid, whereas, for health or welfare-based insurance and money products–a percentage-based commission fee is applied.
The company uses machine learning to avoid fraud, at the point of quotation, while “validating the 99% of genuine customer inquiries.” Also, BGL Group uses Intelligent Assistants (AI) to support continuous improvement and measurable results by rapidly recognizing who a customer is, what is looking for, and providing the right information at the right time. This means that in the future, the company’s business model may change to “multi-sided”.
Disclaimer — Written by Danielle Reza and revised by Francesca Hueller under the direction of Prof Charles Baden-Fuller, Cass Business School. This case is designed to illustrate a business model category. It leverages public sources and is written to further management understanding, and it is not meant to suggest individuals made either correct or incorrect decisions. The information contained here should not be used for investment advice and is simply indicates the individual’s understanding of the company’s business models as of November 2019. © 2019 This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.