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Australia Post now delivering insurance -

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ELEANOR HALL: Small business groups say it is inappropriate that Australia Post is moving into the
insurance market. The Government-owned postal service has announced that from today it will expand
its retail services to include insurance.

But analysts say it will take Australia Post more than its huge network of branches to be a real
force in the highly competitive industry. As Bronwyn Herbert reports.

BRONWYN HERBERT: This year marks 200 years of Australia Post delivering mail. But the bicentennial
celebrations hasn't curbed the expansion plans of this Government-owned enterprise.

From today, the 4,500 Australian Post shops that dot almost every town, suburb and shopping centre,
are moving into the business of selling motor insurance. As Alex Twomey from Australia Post
explains.

ALEX TWOMEY: Well it's a large market and we think we can be quite competitive, we think we can
offer a price that's reasonable but we also think that we've got the well-known brand that people
trust and that is very important when it comes to insurance.

BRONWYN HERBERT: How much is this a move because of the plummeting volume of traditional mail
services?

ALEX TWOMEY: Well we haven't found that there's been a huge drop off in mail that a lot of people
suspect, however that said, we are looking into the future and we do know that our retail network,
which is the largest in Australia, needs to find ways that we can keep it sustainable because it's
such an important hub for the community, and this is just one of the ways we are trying to do that.

BRONWYN HERBERT: David Walker is an insurance analyst with Morningstar.

DAVID WALKER: This amounts to an increase in competition for the two largest listed incumbents, IAG
and Suncorp. Overtime, if Australia Post used its distribution well and played its cards carefully,
we could see it perhaps reaching single digit market share.

BRONWYN HERBERT: David Walker says for Australia Post to compete, it will have to ramp up its
advertising budget.

EXCERPT FROM NRMA ADVERTISEMENT: When did life get so complicated?

BRONWYN HERBERT: Just like its competition.

DAVID WALKER: Major advertising campaigns by both large listed firms at the moment - everyone would
be familiar with NRMA's Unworry campaign. And that's a major advertising presence and it will
depend on what is front of mind for consumers, when it comes time to buy or renew their car
insurance.

Will it be the ad they just saw on TV, or a brochure someone handed them at Australia Post at
lunchtime?

BRONWYN HERBERT: Martin North is the executive director of industry at Fujitsu. He says Australia
Post clearly has the distribution power, but that alone won't land it success in the insurance
industry.

MARTIN NORTH: Probably have more points of contact with the public than any other entity in
Australia in terms of the financial services sector, you know, over 4,000 so that's pretty
significant.

What they're actually doing is essentially servicing those customers and selling a range of
products developed by another organisation, auto and general insurance services. So they're
effectively a distributor, which means they're not actually getting some of the value out of the
underwriting end of the business, but it's in the distribution part of the business.

And therefore the question will be how many customers will prefer to shop with Australia Post
compared with the other very able and capable players that we have in Australia.

BRONWYN HERBERT: Jaye Radisich is the chief executive of the Council of Small Businesses. She says
it's unfair having a government backed service competing against the private market.

JAYE RADISICH: It's not my job to be an advocate for the big end of town but for the large
insurance companies whose shareholders, many of whom are small business owners, it's inappropriate
that the Government should prop up a competitor of the free market.

BRONWYN HERBERT: Stan Cousins owns a newsagency in Campbelltown in south western Sydney and is the
chairman of the Newsagency Association of New South Wales and the ACT. He says many small
businesses were hit hard by Australia Post's move into stationery and electronics.

STAN COUSINS: There has been an impact on all outlets, be it newsagents or others, that retail
stationary and computer products, other electronic products and they have taken a good share of the
market.

BRONWYN HERBERT: Australia Post will sell home and contents, and travel insurance later this year.

ELEANOR HALL: Bronwyn Herbert reporting.