“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.”
He says 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.
Gary Bush, financial adviser at MortgageShop.com, says, having seen consolidation happen a lot over the decades, he believes it is likely to have a negative effect on the protection market.
“To lose two main providers of life cover in 2023 – having seen Aegon get purchased by Royal London earlier in the year – should create concern over both the competition and varied underwriting conditions."
Not all bad
However, Sabrina Hall, mortgage and protection adviser at Kind Financial Services, argues that while consolidation and therefore less choice are often a bad thing for consumers and advisers, in the case of Aviva and AIG, she believes it is less likely to have a significant impact on consumers.
Hall says: “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.”
Kathryn Knowles, founder and chief executive of Cura Financial Services, says there are good and bad points to the trend of consolidation: “It’s much better that these policyholders are moved over to another insurer, so we know that the policies are safe and they still have those protections in place.
“And when we're talking about the insurers that do this absorbing, we're talking very big names here. They are not random firms you've never heard of. They are usually big and reputable companies.”
But Knowles notes that acquisitions mean a loss of jobs and that access to insurance can become tricky.
“So, some people who would maybe have found accessing insurance easier in the past might now have less opportunity to get insurance or maybe not as easily.”
Advisers can also “feel lost”, Knowles says, where they have built a good strong relationship with an insurer, that subsequently gets acquired and they are not sure what the new insurer will be like.
But where the integration is done well or the acquiring business has a forensic understanding of the market, it can be a good thing for the customer, Hussain says.
