Australia:Health insurance sector could consolidate further

The head of health insurer Nib Holdings says that Australia does not need 35 players in the arena as he welcomed the news that two of the country's largest health insurers are planning a merger.

Mr Mark Fitzgibbon, CEO and Managing Director of Nib, said that the merger would hopefully be a "harbinger" for the industry, according to a report in The Australian Financial Review.

HCF, ranked as Australia’s third largest health fund, and HBF, ranked fifth biggest, are considering a merger that would see the new entity hold approximately an 18.4% market share, ranking behind Medibank and Bupa. Nib has a market share of nearly 9% while Bupa and Medibank have around 27% each.

Referring to the merger, Mr Fitzgibbon said: "We don't necessarily see it as a competitive threat...we'll see if it's the start of more widespread interest and consolidation. I'd regard that as a good thing." .

"I don't think there will ever be forced mergers, but it's just a matter of doing the right thing as directors. If there is an opportunity to improve your efficiency and scale, I think we're all duty bound to seriously consider that."

Mr Fitzgibbon said: "The domestic Australian health insurance market is as soft as I can recall. Household incomes aren't growing and there's no shortage of competition in the market."

APRA executive member Geoff Summerhayes said earlier this month that health insurers with low or negative member growth should actively consider mergers.