The attitude of the major banks and resultant merger and acquisition activity means the face of the Australian group life insurance market has changed significantly over the past three years and particularly over the past 12 months.
When the Australian superannuation industry kicked off 2017 funds knew that there were five main group insurance providers – TAL, AIA Australia, CommInsure, MetLife and MLC Life.
As they kick off 2018 superannuation fund executives now know that AIA Australia has nearly completed the transaction which will see it acquire CommInsure, that Zurich is in the process of acquiring the ANZ One Path business and that, having secured the QBE’s life insurance business, new player Integrity Group is seeking to gain a foothold.
At the same time, super fund executives would know that Suncorp is considering the sale of its life insurance business while AMP Limited is leaving its options open.
The bottom line is that while AIA Australia, with the acquisition of CommInsure, will have effectively supplanted TAL as the largest player in the group life space none of what has happened in the life insurance sector over the past three years can be seen as diminishing competition.
Certainly, AIA Australia chief executive, Damien Mu does not believe there has been any diminution in competition nor does he think there is likely to be.
Answering questions posed by Super Review, Mu acknowledged the efforts of MLC Life in the group space, together with the implications of Zurich’s acquisition of OnePath.
However, like TAL chief executive, Brett Clark, Mu points to reinsurance capacity sitting at the heart of the competitive trends now emerging across the sector.
“The group life insurance market has always been competitive however there has been an increased appetite by more companies in the last couple of years which has been largely off the back of renewed reinsurance capacity,” he said.
“Organisations such as MLC Life have been active in the group life market for a long time along with a number of other life insurance companies,” Mu said. “We at AIA Australia welcome competition and believe it is fundamental to ensuring a sustainable market that continues to innovate and improve.”
TAL’s Clark, whose business has recently secured an extension of its mandate with AustralianSuper, acknowledges the level of competition currently on show in the group life space, but argues that it is attributable to a range of factors.
“Competition in the group life market is generally not a function of any one insurer, but a function of many factors,” he said. “Given the size of the Australian group life market, one critical element is reinsurer capacity which is generally driven by global market conditions and not only local conditions.”
Clark said that with respect to reinsurance in particular, it was important for trustees to be aware of and understand how the reinsurance arrangements and factors outside of the local market could impact Australian group life market conditions.
He said that it was in these circumstances that he did not interpret too much out of the recent merger and acquisition activity, particularly Zurich’s acquisition of OnePath.
“I don’t see one insurer in or out of the market making a material difference to market conditions,” he said. “The Australian life insurance market and group life market in particular is more competitive than most financial services markets in Australia by comparison.”
“Any Trustee that was looking at taking their life insurance arrangements to market should feel very confident about getting good interest from life insurers and good competitive outcomes for members.”
When MLC Life was broken away from National Australia Bank via the transaction with Nippon Life, its chief executive, David Hackett raised some eyebrows when he outlined strong plans to pursue a greater presence in the group space, including chasing industry fund mandates.
However, Hackett defied the sceptics when MLC Life last year announced that it had secured the group mandate for industry fund Vision Super – something which he told Super Review this month that was now fully bedded-down.
He said that having completed the processes around Vision Super, MLC Life was now competing for a number of other mandates.
MLC Life chief customer officer, Suzanne Smith acknowledged that there had been considerable change to the group life landscape but, not unlike TAL and AIA Australia, said it was the firm’s intention to hold to its strategy.
Like other segments of the superannuation industry, the group life sector has been impacted by the Government’s decision to hold the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services industry.
Key superannuation consultants such as KPMG’s Adam Gee and Deloitte’s Russell Mason said that the attention being given to the Royal Commission had meant that a number of funds had pulled back from taking their group life mandates to market.
However, a number of mandates had been the subject of calls for expressions of interest from insurers, and the slow-down created by the Royal Commission was not expected to extend past the close of the financial year.