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Insurance Brokers Concerned About Sthrn Cross Bid

Insurance Brokers Concerned About Sthrn Cross Bid

The Corporation of Insurance Brokers is raising concerns with the Commerce Commission about Southern Cross' proposal to take over Aetna health insurance, which will give Southern Cross around 80% of the health insurance market.

Corporation of Insurance Brokers chief executive, Malcolm Congdon, says brokers have serious concerns that if the merger goes ahead it will take away all effective choice and competition in the health insurance market.

"We are concerned that with an 80% share of the market, Southern Cross will have total dominance in the market and it will be consumers who suffer. Southern Cross will be able to be price predators and squeeze out any opposition, and there will be a lack of choice for consumers."

Malcolm Congdon said that Southern Cross does not deal with brokers, as they prefer to use their own distribution channels. "Our members handle 70% of all commercial business placed in New Zealand, but it will be difficult for us to offer our brokers expertise and negotiate special deals on health insurance if Southern Cross controls 80% of the health insurance market, but refuses to deal with us."

"The ability to tailor health insurance products to the customers requirements will not be great, as Southern Cross can say take it or leave it with regard to the level of cover they are prepared to provide."

Malcolm Congdon says although some commentators have claimed there are low barriers to entry for other insurers, they are underestimating the issue of getting customers to switch insurers.

"Once customers are with a health insurer it is not that simple to change to a new one. There are issues like medical clearances and pre-existing conditions that can keep customers locked into their existing health insurer".

Mr Congdon said the Corporation of Insurance Brokers is viewing the merger with concern and is taking it up with the Commerce Commission.

ENDS
For further information, please contact: Catherine Beard, Principal, Comsar Communications, Tel (04) 389 0544, Mob (021) 633 212 Malcolm Congdon, Chief Executive CIBNZ, Tel 09 309 4343 or 025 728 403

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