Don't be fooled by the plethora of brands

So, you might assume you are hunting for the best deal, by comparing policies from say AAMI against Bingle, GIO, or Apia. But ultimately, all these brands are owned by one company – Suncorp in this instance.

The banks do it, too. Westpac, our second biggest bank, sells its products under brands such as St George, Bank of Melbourne or BankSA, while National Australia Bank has its own digital offshoot, UBank.

True, these different brands tend to sell slightly different products, at different prices. But they are clearly not set up to compete away their owner's profits.

Smaller rivals to the big banks have long complained about these "multi-brand" strategies, saying they are designed to deliberately pinch consumers who don't necessarily want to deal with a financial powerhouse.

Now, the Productivity Commission has put the spotlight on the practice in a draft report on competition in financial services.

There's nothing illegal about a company owning lots of brands, but the Commission says the practice can create an "illusion" of a market that is more competitive than the reality.

It's particularly concerned about how this happens in insurance. Even though it looks like there are dozens of firms out there vying for your business, it found the four biggest insurance companies have more than 70 per cent of the market for home, motor, travel and mortgage insurance.

In such oligopolies – markets dominated by a small handful of players – businesses are less inclined to compete too fiercely on price, instead competing through marketing or subtle differences in the cover they offer.

In other words, the commission is concerned this is a way of tricking consumers, and allowing these businesses to charge more than they would otherwise. Having said that, it also acknowledges profitability has been coming down in recent years in the insurance industry, which may point to competition.

So, what could be done to deal with the illusion?

The commission suggested insurance company's websites should clearly communicate to consumers all of the brands that insurer underwrites. Renewal notices should also include last year's premium, and the percentage change, which is similar to what will happen with electricity bills.

Choice points out that in the United Kingdom, making this change to renewal notices caused 11 to 18 per cent more consumers to dump their insurer for a rival, or negotiate a better deal.

In home loans, the commission also suggests requiring regulators to publish the latest home loan rates being offered (which are different to the advertised rates), so that consumers could get a clearer idea if they are being ripped off.

These changes would be worthwhile, but let's not overstate their likely impact.

One of the big lessons regulators have learnt in recent years is that because financial services are often very complex, many consumers are baffled by the array of choice, and they become "disengaged".

Giving people a nudge to think about whether they are getting a good deal – through more information on their insurance bills – will probably help. But it's difficult to know if that will be enough to drive a significant lift in competition. As always, it will also be up to consumers to be shop around, which includes being aware of "multi-brand" strategies.