Government needs to ensure competition and fair prices in insurance industry

New Zealanders could face insurance premium hikes if the National Government continues to sit on its hands over competition in the sector, Green Party Co-leader Dr Russel Norman said today.

IAG is moving to buy the insurance company Lumley and further increase its already dominant position in the New Zealand insurance market.

“This move highlights the need for the Government to adopt recommendations from the Productivity Commission aimed at protecting competition in service industries,” Dr Russel Norman said.

IAG currently owns the NZI, AMI, and State brands, which together make up 40 percent of the $5 billion New Zealand insurance industry. Owning Lumley would boost IAG’s market share to over 50%. The Productivity Commission has recently issued its second interim report on improving productivity in the services sector, recommending strengthening the Commerce Act to prevent abuses of market power.

“It’s not healthy for industries like insurance to be overwhelmingly dominated by a single company; the Government needs to strengthen competition law to ensure families and businesses get fair prices,” said Dr Norman.

“If IAG becomes the owner of the majority of the New Zealand insurance industry, the decrease in competition could result in higher premiums for customers and bigger profits for IAG’s offshore owners.

“The Government needs to listen to the Productivity Commission’s recommendations on boosting competition in service industries. In particular, improving section 36 of the Commerce Act to restrict the exercise of market power would help to prevent situations where industries become dominated by a single player, as is happening in insurance,” said Dr Norman.

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