Suncorp eyes private health insurance market

 
Suncorp Group is eyeing the private health insurance sector with sources suggesting it is looking at creating its own in-house capabilities. Photo: Joe Armao

Suncorp Group is eyeing the private health insurance sector with sources suggesting it is looking at creating its own in-house capabilities. Photo: Joe Armao

 

Suncorp Group is recruiting health insurance experts and contemplating setting up its own private health arm as the $17 billion insurer hunts for new growth avenues.

As first revealed by AFR Street Talk, Suncorp Group is eyeing the private health sector with sources suggesting the bancassurer is looking at creating its own in-house capabilities. Ernst & Young is believed to be helping the company.

A Suncorp spokeswoman said the company was recruiting “greater expertise” to “examine further opportunities” in private health. Suncorp currently participates in the health sector through its alliance with NIB and its Apia business.

“As with all our products and services, this offering is routinely reviewed to ensure we are best meeting the needs and expectations of our customers,” the Suncorp spokeswoman said. “Accordingly, we have recruited greater expertise in this area to examine further opportunities. Any changes to our products or services are announced at the appropriate time,” she said.

Andrew Adams, insurance analyst at Credit Suisse, said Suncorp’s alliance with NIB meant they would be able to gain insights into the sector.

Suncorp is understood to have run the rule over Medibank Private in 2007, but closed the door on a big acquisition after taking a close look at an external health insurer earlier this year.

“The strength of their general and life insurance brands could transfer to health insurance,” Mr Adams said.

“If the government is considering a change to the ancillary model, Suncorp would also be well placed via their banking division to support this savings approach,” he said.

Insurance analyst Daniel Toohey from Morgan Stanley said Suncorp faces growth challenges in its portfolio and adding health insurance would improve the company’s prospects.

In a note to investors, Mr Toohey tabled the idea of Suncorp hiving off its bank business and instead buying NIB to create a pure insurance company.

“Adding health insurance improves the growth outlook while reducing capital intensity and expanding the potential PE [price earnings],” he wrote in a note to clients.

“With health also now regulated by APRA [the Australian Prudential Regulatory Authority], there is logic to combining health and life [insurance], with upside from a focused insurer cross selling the various offerings to existing customers.”

Newcastle-based NIB struck a deal with Apia in May last year to tap the $10 billion over-50s health insurance market. Apia provides insurance such as car cover to older Australians.

Rhod McKensey, NIB group manager of Australian health insurance, said last year that the average premiums paid by the over-50s market were 40 per cent higher than the under-40s.

Under the arrangement, Apia, which has about 700,000 customers aged over 50 years, will sell health insurance under its own brand that is “white-labelled” by NIB.

Apia will be paid a commission and NIB will remain as the underwriter and provide ongoing customer service.