Home Business News Consolidation in insurance market ‘could result in bad outcomes for consumers’

Consolidation in insurance market ‘could result in bad outcomes for consumers’

by LLB Finance Reporter
5th Oct 23 3:02 pm

Following Aviva’s acquisition last week of AIG’s UK protection business, a number of brokers and protection experts have expressed their concern that this could result in bad outcomes for consumers.

The acquisition by Aviva follows Royal London’s purchase of Aegon’s protection book earlier this year, and some experts are concerned that a protection market made up of a handful of mega-insurers could herald the death of innovation, higher prices and lead to a stagnant, undifferentiated marketplace.

According to Richard Campo, founder of London-based Rose Capital Partners: “With a reduction of players in the market, I am worried this could potentially drive prices up and mean the protection gap widens even further.”

Scott Taylor-Barr, director of Leicester-based broker Barnsdale Financial Management, agreed: “Sadly, I feel that consolidation in this area of the insurance market is not great news for advisers or clients. As we get fewer and fewer choices, we also get fewer and fewer options for more complex situations.

“While consolidation can drive down costs, this only helps those that are considered ‘good risks’, namely young and healthy individuals. Those looking for cover later in life, with more complex medical histories or ongoing conditions, or with high-risk jobs or activities, could find themselves paying a far higher price than today or being excluded from cover completely.

“The market will need some smaller, more specialist insurers within it to properly underwrite and support those that fall outside of the mega-insurers’ “computer says no” model.”

However, Sabrina Hall of Lichfield-based Kind Financial Services, was not overly concerned: “While consolidation and therefore less choice are often a bad thing for consumers and advisers, in this case I think it’s less likely to have a significant impact on consumers.

“The reason for this is that Aviva and AIG had similar underwriting rules so I don’t feel that we will suddenly see tightened criteria and less choice with these two particular brands consolidating.”

But Paula Steele, director at London-based specialist life insurance broker, John Lamb Hill Oldridge, said: “We will miss AIG as their underwriting is more responsive to clients’ actual circumstances.”

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