So, what impact is this having on insurance brokers and the coverage options for their customers? “It’s difficult to generalise but often the end result being targeted is product simplification,” said Stacey Hooper, EY’s Oceania insurance leader.
Hooper said this often leads to fewer choices for customers and fewer options for brokers. “While those products remaining on sale may be more contemporary, there may still be a loss of choice and market competitiveness,” she said.
Hooper said her comments refer to commercial insurance offerings and also life insurance.
Hooper’s colleague, Daryn Saretzki, financial services leader for EY’s Parthenon Oceania division, said insurers will typically seek to minimise the impact of their M&As on brokers.
“But often there will be some changes in terms of the systems or people brokers use, interfaces and digital portals and the degree of product choice,” he said.
Saretzki said where product choices are reduced brokers may need to do extra work to find other insurers to work with to broaden the selection for their customers.
Two firms that could have valuable insights into M&A impacts on the insurance industry are Clifford Chance, a global law firm and The Bridge International, a management consultancy. The Royal Automobile Association of South Australia (RAA) engaged The Bridge to help it do the deal with Allianz. Clifford Chance advised Pemba Capital Partners on their recent acquisition of Hunter Premium Funding, Allianz’s insurance premium funding business in Australia and New Zealand.
The Bridge issued a media release detailing the “real value for RAA and Allianz” it brought to that deal. A release from Clifford Chance referred to the “complex multi-party transaction” it helped complete.
Neither firm was able to provide answers.
The Motor Trades Association of Australia (MTAA) sent a submission to the Australian Competition and Consumer Commission (ACCC) when the regulator was reviewing IAG’s proposed acquisition of RACQ and Allianz’s proposed acquisition of RAA.
The MTAA strongly opposed both acquisitions citing “significant concerns about market power abuse and the broader impact on the Australian insurance industry.”
The motor association submission said a lack of competition in the insurance sector is already a big issue.
“These acquisitions offer no benefit to our industry, no benefit to consumers, and only serve to reinforce the dominance of insurers who dictate market terms to the detriment of repairers and motorists alike,” said the submission.
“Allowing further consolidation will give insurers even greater control over pricing, repair conditions, and settlement terms, ultimately reducing consumer choice and fairness in the market,” it said.
The MTAA called on the government and the ACCC to change the regulations around mergers to include enforceable undertakings, “requiring merging insurers to meet strict conduct standards with significant penalties for non-compliance.”
Last month the ACCC decided to allow the Allianz/RAA merger. IAG already has a green light to take over RACQ. The regulator is currently considering IAG’s second merger move with RAC WA.
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