German giant Aldi is offering to install “smart sensors” in Australian homes in exchange for cheaper insurance, becoming the latest supermarket chain to market financial services.

The sensors are part of Aldi’s plan to undercut similar insurance offerings from rivals Coles and Woolworths.

Unveiled on Wednesday, the offer brings Aldi’s everyday low-price philosophy to insurance – with no one-off promotions and the same deals available to new and existing customers.

The supermarket said it will market three types of products underwritten by RACQ, including: Home and contents insurance, comprehensive car insurance and even landlords insurance.

Aldi will also offer lower premiums on home and contents insurance to policyholders who install “smart sensors” to mitigate against  claims like fire, water damage and theft.

Savings of up to eight per cent will be available for those willing to install the sensors, Aldi said.

“The use of technology like smart sensors in homes is an innovative way to bring down premiums by reducing the risk of unfortunate mishaps in the home that our insurance protects against,” Aldi group director Rodney Balech said in a statement on Wednesday.

“It’s a win-win.”

Supermarkets jump into insurance

Aldi isn’t the first supermarket to start offering insurance in Australia; both Coles and Woolworths also have financial services products underwritten by insurers.

Finder insurance expert Tim Bennett said supermarkets have jumped into the insurance business because it’s a way for them to leverage the dominance of their grocery brands.

It’s a practice called white labelling, where a well-known consumer brand markets products on behalf of lesser-known corporate giants like insurers or telecommunications companies.

Examples include Woolworths’ mobile SIM deal with Telstra and Coles’ pet insurance offer that’s underwritten by Guild Insurance.

“[Supermarkets get] a short cut into another market and diversify income,” Bennett said.

Smart sensors

Aldi has also partnered with Honey Insurance for its offer, which is where the smart sensor technology comes in, according to Bennett, who said the tech is designed to reduce risk.

Basically, insurers are prepared to charge less if they can be assured you’re less likely to make a claim because you’re monitoring against potential problems like water leaks or fires.

“They install three devices around your house that can help sense and prevent water leaks, smoke and open doors,” he said.

“It’s insurance that aims to ensure you don’t claim.”

The sensors are a key part of Aldi’s strategy to undercut competitors – including Coles and Woolworths – with cheaper premiums, but there’s also another element to the strategy.

Bet on simplified product

The German giant will also eschew any discounting or promotions, betting that customers are looking for a simple, no-frills financial product that doesn’t come with any loyalty taxes.

Bennett said that’s a strategy that could work, particularly as consumers are increasingly suffering promotional fatigue for financial services, such as home and vehicle insurance.

“Australians are sick of hidden fees and sick of getting charged for services that don’t really pass the pub test,” he said.

But it will be up to Aldi to prove to customers that its offer does what it says on the tin and nothing else, with the risk being that its brand suffers damage from scorned customers.

“It’s baked into the business model that people aren’t always going to be happy,” Bennett said.

Home and vehicle insurance might not be the only financial service Aldi dips its toes into either, with the company recently filing trademarks for other products it could be launching.

Readers should always review product disclosure statements in detail before purchasing any financial product, including insurance, and consider whether alternative products could offer them better value. 

Aldi’s disclosure statements can be accessed here.