HCF-HBF merger good for competition and diversity

21 February 2018

Media Release: HCF-HBF merger would restore diversity to our economic ecosystem
Sydney, Feb. 21

The mooted HCF-HBF merger will create greater competition in the Australian health insurance market by strengthening a business model praised in the Productivity Commission’s Draft Report on the Financial System, says Melina Morrison, CEO of the Business Council of Co-operatives and Mutuals (BCCM).

The Productivity Commission report decried the “persistent marketing and brand activity designed to promote a blizzard of barely differentiated products and ‘white labels’” that has led to customer confusion across the insurance sector, and pointed to the underlying lack of choice and price pressures this has created.

“The proposed merger between mutual insurers HCF-HBF would create a mutual entity large enough to compete with the big listed insurers, offering consumers a real choice and making the overall insurance market more competitive,” says Ms Morrison.

“It is time we paid more attention to encouraging business model diversity in all sectors of the economy. A resilient economy needs more than just listed investor-owned firms; private companies, small and family-owned enterprises, not-for-profits, co-operatives and mutuals all contribute to competition and economic health.”

“The way in which these business structures contribute to economic health was highlighted internationally during the global financial crisis. In this period of turbulence, co-operatives and mutuals proved themselves more resilient than listed firms,” says Ms Morrison.

“As listed entities were bailed or failed, mutuals in the banking and insurance sectors proved their mettle. Because co-operative and mutual entities have different business imperatives, these firms behave differently, pursuing business plans that aim to secure long term success for their members. This is seen in the way they approach corporate governance, risk appetite and management, incentive structures, policies and practices, and company culture – issues close to the heart of the current Royal Commission into the financial system.”