Impact of Industry Consolidation

Will fewer life companies operating in Australia translate into less competition and disadvantage customers?

Our latest poll considers the question of industry consolidation.  We are seeking your opinion as to whether you believe your clients will be disadvantaged by less choice and potentially less flexibility that may result from fewer institutional players in the market.

Our question is:

Do you believe that more life company consolidation will have a negative impact on consumers?

At his company’s AGM last week, TOWER Australia’s Managing Director, Jim Minto, raised his concerns about the  potential impact to consumers of fewer companies operating within the life insurance market:

“The transformation of the market to fewer, larger players creates a concern that Australians will lose choice amongst life insurance providers as well as see a loss of independent companies and innovative solutions.”

… large players with power can create reduced choice and higher prices

“We will potentially see Australians being offered higher margin products as a result.  Life insurance is not a price and value sensitive consumer commodity product and large players with power can create reduced choice and higher prices,” warned Mr Minto.

Others may present an alternative case that consolidation, if managed efficiently, will lead to greater economies of scale, which could in turn have a positive impact on product pricing.

Economies of scale may also allow investment in expensive, cutting edge, customer service technologies that may not otherwise be feasible (eg the next generation of electronic underwriting and online client management services).

But advisers and dealers are at the sharp end of the life insurance/financial planning market place and know their clients best.  What is your view?  Will more industry consolidation lead to a positive outcome for your clients?  Or do you believe your clients intetrests will best be served in their ability to choose between a broader array of life company ‘propositions’?

Have your say…