Tony skinner 00:04
Hi, and welcome to the podcast channel for podcastmy business.com.au And also for content made easy.com.au that I use for the video aspect as well. So today we’ve got Trond Smith from https://kyco.com.au/ Are you. So a well known American brand called Tyco. I think I do insurance or something, but you’re not far off that one. How you going there Trond.
Trond 00:29
Well, thank you.
Tony skinner 00:32
Excellent. And we’ve got Trond on today, because he’s got a bit of a David and Goliath battle on his hands, for the consumers. So we’ve got to thank him for that. That there’s lots of comparison sites, as we call them, that include those stupid squirrels that are on high rotation on TV, with a Russian accent, about comparing insurance prices and everything else. But there’s a will I call it a scam. There’s an issue with those sorts of sites and things are not quite upfront about can you share that with us Trond
Trond 01:02
It’s not just the comparison sites, it’s the majority of third party retailers. And the issue is that their business models are completely unaligned with the business models of the suppliers and the products they’re selling. All these third party retailers have substantial commissions. And those commissions, you know, eventually get charged on charge to the consumer in the form of higher premiums. I think the majority of your listeners will probably have, you know, car insurance or house insurance, or any other type of insurance they may have. But I think they’d be mortified to know that, you know, 40 to 45% of the premiums they’re paying, go into the company, or person that sold them to. 
Tony skinner 01:52
Wow. So how does that work?
Trond 02:02
The percentage can change across different insurance companies and different insurance types. To give an example, look, and I’m aware of it, but I’m not immune to it. And that’s what Kyco is all about, you know, we can’t do this on our own. But we can do this together. You know, we’ve got a blue cattle dog pup, which required surgery three weeks ago, and I had to go through the Product Disclosure Statement to ensure that that, that she was covered for that surgery. And what I found is that 42% of that premium is going in commission. So $960 premium, in excess of four $400 of that is going in commission. And that’s an on cost that, you know, we as consumers are paying.
Tony skinner 02:54
Wow, so. So if you’re only getting $500 value, shall we say, then, who’s not making money, the insurance company, so what sort of coverage they truly giving you because of that?
Trond 03:12
Well, I think the insurance companies still give us a reasonable level of coverage. It’s just a problem that we’re paying too much for it. And that’s where I say these third party retailers models are completely unaligned with the suppliers. And it’s actually you know, those that don’t switch that end up paying for it. If you think about the third party model, they take these large commissions for them as a business, you know, they get a large commission when they sell the policy. They know when that policies going to end, often for the supplier in this case, so potentially supplies had a loss on it. They have to increase that policy in the following year. And the third party retailer comes back and offers another discounted policy. So every time you’re switching, you’re introducing this cost back into the system. And it’s costing It is literally costing Australian families 10s of billions of dollars per annum.
Tony skinner 04:12
Hmm, yeah. And I remember when these are first started, that they weren’t disclosing that they only have a select choice of companies that you get to choose from when they say they compare the market and things like that.
Trond 04:29
Very few of them compare the entire market and a lot of the comparison websites that you’re referring to are actually owned by some of the insurance companies. So the products that they’re selling often are their own. But they also you know, they’ve been fined numerous times. Trivago got fined $45 million last year for misleading consumers on the best price for hotelselect fined eight and a half million dollars it’s almost built into their model as a cost of doing business.
Tony skinner 05:06
Well, certainly I’m aware of I select are probably one of the first major ones out there, that they got fined, and they were not being upfront. So you’re coming up with an alternative. So how does it actually work?
Trond 05:21
So we’re a community buying group. So the bigger we can build the community, the more buying power we’ve got, you know, it’s basic, you know, economics, I guess. It’s like a co op in reverse. Instead of selling products as a group, we’re buying them as a group. But we also eliminate the waste. So we create that saving in the first instance, by getting rid of those commissions, Costco is going to be completely transparent, we’ll tell you how we make money, and we tell you how the system works. And we will charge a fee of just 3%. So if you’re currently got a car insurance policy, where you’re paying 40, or 45%, commission, immediately we create a considerable savings for the supplier, which they can then pass on a discount to the consumer.
Tony skinner 06:16
was interesting, because if I do, again, I don’t tend to use the comparison sites because I’m aware of what they like. But if I didn’t use a comparison site and and look at the insurer, or the prices that much different So is it the insurance a taking more directly to match the Commission’s for somebody.
Trond 06:36
So what happens is, if you’re on the comparison site, you’re going to often your ring the insurer directly you’re going to get a similar price, that the product that sold through these third party retailers is attracting these Commission’s and often are creating a loss for the consumer for the for the supplier, that supplier, the only way for the supplier to recoup it because these people are the ones that switch all the time is to spread that across the balance of their consumers. So the a triple C does a regular study of the retail pricing of electricity. And you’ll note in that report, they have a cost of acquisition and retention per consumer, which they do across the entire portfolio of a company’s customers. They then will report the actual cost of acquisition and retention, which is the net, the net new consumers. And what you’re finding is that, you know, the cost of those net to consumers is being borne by the 70% that don’t switch, because that’s the only option that suppliers have of recouping the money.
Tony skinner 07:52
Wow. Okay. So they’re relying on people not switching. So when I got to give you an example, so car insurance, I had a high performance car, I’ve got a different car that still high performance. But anyway, I did WRX when I bought the car, no comparisons, like wanted to insure because of the nature of the car. So i went to nrma or gio or whatever. Just recently the renewal came out, and it’s 25% higher than the previous year.
Trond 08:25
And that’s very common. You know, the Hain Royal Commission touched on it in the banking Royal Commission about these secrets commissions and how they get bumped up and how much people are paying extra. So Professor Allan Fels estimates that on house and contents insurance alone, that that that figure is $3.6 billion. So, you know, once again, that’s if they’re paying a high commission to get you on board. So on that example of the car, so you’re paying a commission of 40% on that car insurance, and then they might, because they’re competitive by nature, they’ve got to try and win your business, they might offer you a 15 to 20% discount, you’ve now got 55 to 60% of your first year’s premium, not going to the company that provided they have no option but to push it up. And that’s where these companies then introduce you to another discounted price, which is adding cost to the system all the time.
Tony skinner 09:37
Okay, so I guess the thing is, is that consumers like these comparison sites because it saves them time and effort from going to place. Is that itself worthwhile?
Trond 09:51
No, it’s not and that’s why they these companies are being find they don’t necessarily always offer you the best price they may be offering you You want their own product, they may be offering you a product that they receive a higher commission on. So it’s in their benefit to to promote that product for you. And there’s been new, there’s been a Senate inquiry into general insurance, there’s been, you know, the Hain Royal Commission, the a triple C choice of all done studies into retail electricity, and these comparison sites. And, you know, they’ve recommended that the federal government introduce a mandatory code to minimize consumer harm by using these sites, you are not getting the best deal. And we are adding cost into the system at all times.
Tony skinner 10:43
Okay, so I just went to one of the sites well known. This is from participating brands, but it also says no hidden, or is it okay, back up? I’m not gonna say who this company is. But it says here, no hidden fees. Easy, no false comparison, no hidden fees, no messy paperwork?
Trond 11:09
I’d say that’s misleading. There is technically it’s not hidden, I guess, where they have to report it is in PDS Product Disclosure Statement or a Financial Services Guide. Now, there’s very few consumers out there that read it. And I challenge anyone that’s listening to this, to go and get their insurance policy go and get you know, anything. You know, whether it’s car health, health or home and contents, read the PDS read the Financial Services Guide and see what what percentage of commission you’re paying. And I’ll guarantee you it’s in excess of 30%.
Tony skinner 11:52
Yes, intriguing. I have, again, we’re looking at that particular site. And where it says no hidden fees, and I picked a characterize product. And I just scrolled through it. And it’s nothing on the information page itself about the fees
Trond 12:08
until you get the Product Disclosure Statement. And often you don’t get that until you can ask for it. And they will give it to but often you don’t get that until you’ve signed up for it. And legal document can often be 20-30 pages long, very few people read it. And that’s where it is. What it needs to be, it needs to be transparent. It needs to be on the front page where people can see it in as part of their decision making. When purchasing a product.
Tony skinner 12:40
You are spot on I’m on one of those people that do read the Product Disclosure Statement. And everybody should Yes. In fact, a little story a few years ago, I found this cheaper car insurance company and I thought Oh, that’s good. And I went ahead with them. I was filling out doing all the stuff, I got the PDS early. I went through the PDS and it’s about we will not insure you if your car gets damaged in for example, in a car park, if someone runs into the shopping trolley. Yeah. And I phoned them What do you mean that’s car insurance is damage to the car. And it was bears out that we don’t cover for that type of accidental damage. Cover for accidental damage? We don’t really but not that type? I think so. So basically, you’re saying you’re only cover people who leave their car in their garage. And don’t go to the shopping car parks.
Trond 13:31
Yeah. And that’s another reason why it pays to read that Product Disclosure Statement. Because there there are vast differences in quality across different insurance insurance products. And that’s what you know, Cortez hoping to do. By building the consumer consumer buying group will have that buying power, but we’ll also have the knowledge we’ll be able to, we’ll be able to check all that for you. We’ll be making sure that you’ve got a policy that meets your needs. And and it’s much easier, it’s much harder for a supplier to not cover somebody on their own, as opposed to someone that’s part of a group of 10 or 15,000 people you know, when you when you join Tyco you have that support as well.
Tony skinner 14:22
Yeah, okay, so is this I’m presuming this is not the first business you set up? What sort of business experience do you have?
14:30
So I’m a sursurveyor by trade. I had a small business, doing land surveying and expanded into soil erosion control. So we were actually the first I was the first person to or my company was the first company to develop a way of printing onto the silk fencing and shade clotting that goes around commercial building sites and And we grew that significantly in southeast Queensland.
Tony skinner 15:05
Wow. Okay. So, okay, so what’s the website again?
15:10
https://kyco.com.au/
Tony skinner 15:10
Okay, k y c o.com. And whilst we’re building the community where we are, we’re offering relief where we can you sign up to https://kyco.com.au/ and join the community. We’ll be giving away fuel vouchers monthly, in a monthly draw to our consumers. And for anyone that signs up for every person, they refer to the https://kyco.com.au/ who signs up as well. We’ll give them a $50 Grocery voucher. So we’re backing ourselves while we’re while we’re waiting to build that community to go and negotiate the prices for them. Okay, so that’s K Y C O
Trond 16:00
the name comes about from a combination of my, my, my son and my wife, my wife, my son’s name is Kai KY E and my wife is Korean. Together, we got Coco.
Tony skinner 16:13
So great, great way of doing it. Okay. Cool. All right. So anything else you’d like to add?
Trond 16:19
Come and check this out. You know, we we are we are set up for the consumer, that’s the entire business concept was to stop Australian consumers being ripped off, we’re completely transparent. We’ll never sell your data. You know, check us out. And hopefully together, we can lower the cost of living.
Tony skinner 16:42
Excellent. So it relies on the number of people that join. So the more people you have, are presumed the more savings are,
Trond 16:50
the greater the greater the community, the more we can save. And to give you an example of that one of the large, the three big electricity retailers, last year spent 98 million in advertising to win new consumers. Now they want about 420,000 consumers. But they also had about 400,000 churn. So the net figure was 26,000. So effectively, they paid 98 million for 26,000. So if we can turn up there with 5000, what’s the value? What is our value? And how big the saving can we create for those 5000 people?
Tony skinner 17:28
And this is a tiny, we’re looking for deals like that electricity, and whatever is all gone. I got miners from my electricity company saying the prices are going up. I don’t know how much they’re not very clear on it. They go this percentage this, this, this and this and they change all the different things. Yeah, you got different types of tariffs, shall we say you got the tariff, but just being a customer, without even using anything than the tariff for daytime and a tariff off picking a tariff or this tariff is that we want to give you a tax
Trond 18:01
and, and that’s how they like it. They like it nice and complex. So people make, it’s hard to understand. But to simplify it, the average residential customer is paying well, in 2021, it’s gone up since was paying $27 A kilowatt 27 cents a kilowatt. The average big business was paying 15 cents per kilowatt, we’re paying 80% greater than big business and why big business can negotiate a better price because of their volume. If we build a community, we have that volume, we can negotiate those prices. And the suppliers are all on board. You know, the suppliers currently have a model which encourages churn and they have to pay high commissions. A model that lowers that cost of acquisition and encourage loyalty takes it from what Professor Alan fills will people currently paying a loyalty tax? We should be rewarded for loyalty. And that’s the qualitative
Tony skinner 19:09
Yeah, like every time I get a renewal notice on any insurance I always compare. I always double check as much as I can. Yeah, recommend your system is definitely gonna be better for him.
Trond 19:20
Yeah, absolutely. And I do the same thing. And like I say, I’m not immune to on my own. I’m paying those 40% Commission’s on paying 42% commission on my on my pet insurance. But together, we build this community, we can eliminate those costs.
Tony skinner 19:36
Fantastic. All right. Right. Trond. Okay.
Trond 19:38
And like this is the perfect time we’re doing this absolutely. Cost of Living crisis, be another interest rate rise this afternoon. They’ve announced this morning, less than 20% of rental properties are under $400. You know, we need to do what we can we need to do it now.
Tony skinner 19:56
Absolutely. All right. Great. Trond.
