The life insurance sector has recently been shaken up by an increased level of M&A activity, the most recent being Zurich’s $415 million acquisition of ClearView, which was recently given the go ahead by the ACCC.
In the wake of this, Skye Wealth risk adviser Phil Thompson said the once diverse life insurance market is becoming ever smaller.
“You’ve got these big behemoths, like your TAL, your Suncorp, and Resolution Life have come together,” he told ifa’s Evolution of Advice Summit in Sydney last week.
“You’ve got two platform players with the Neos, Futura and Encompass, and now Zurich trying to do that kind of platform play where they’ve got multiple products within the same platform.”
Thompson added that this does bare one positive aspect. With premiums continuing to rise, smaller boutique insurers going forward will likely have “questionable sustainability”.
“That’s why I like that ClearView just got sold,” he told the summit.
“It is an interesting time when it comes to insurers and seeing where they’re moving and what they’re doing. I think it’s good ClearView is now being governed by Zurich. From what I understand, Zurich are planning on having that platform play to counter what Neos are doing.”
However, as Hayes & Co Insurance risk adviser Trish Gregory said on the same panel, these M&A movements are the sign of an industry being increasingly concentrated into the hands of a small number of large players, recalling a time when there was up to 50 insurers, with that number reduced to less than 10.
“I’m concerned, obviously, that we will just continue to reduce and reduce and reduce the insurers. Will we end up with a Woolies and Coles scenario?” she said.
A more concentrated market could mean less choice for consumers as it opens the door for the big insurers to standardise offerings across their brands.
“When we think about it from an insurance perspective, we’ve got two providers; Zurich, OnePath, ClearView, so three insurers in one; and then we have Neos, Futura and Encompass, so another three insurers in one.”
That being said, Gregory emphasised this concern has yet to eventuate, arguing that this kind of consolidation could actually help improve adviser efficiency.
“What that means now is it’s going to be combined with Zurich and OnePath, and so we’re going to have these three insurances with three different underwriting outcomes, with three different pricings and three different ideal client segments all under one banner, in one platform, talking to one underwriter, so that will be really handy.”
As things stand, the ACCC’s endorsement of Zurich’s deal with ClearView could be interpreted as a sign that the regulator is not yet concerned with the levels of consolidation within the life insurance space, and only time (and potentially more M&A activity) will tell if the industry is heading to a ‘Coles and Woolworths’ style duopoly.
Reinsurers drive the underwriting decisions and there’s not many of them. Coles, Woolies, Aldi and Costco maybe more reflective of the current situation.