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Nib aims to take on Southern Cross

By AAP
14:48 AEST Fri Nov 2 2012
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Australian health insurer nib holdings wants to challenge mutually-owned Southern Cross, which has 60 per cent of the New Zealand market, after buying Tower Medical Insurance for $102 million.

Nib will replicate its Australian strategy of aggressive marketing to grow Tower's 13 per cent market share.

"Southern Cross is burdened with an ageing risk cohort. The opportunity is ripe for someone to come in and start cherry picking some of the better risk," nib managing director Mark Fitzgibbon said.

Southern Cross did not have much margin in their business to defend their position with, he said.

Nib wants to target employer group business, which makes up 50 per cent of the health insurance market in New Zealand.

"I think we can go after some of those groups through price," Mr Fitzgibbon said.

The company will convert the Tower business to the nib brand but Tower advisers will sell Tower branded health insurance products sourced from nib.

Nib will appoint a board with two resident New Zealand directors and will look for a chief executive to run the business.

It will adjust "some funny arrangements" with brokers in a rationalisation of distribution.

Mr Fitzgibbon said Tower had lost 20 per cent of its policyholders in the last five years, its margins had deteriorated by a third and the private health insurance market had been shrinking.

"It's ugly," he said, referring to the market.

Investment by nib, an economic recovery and the creation of a direct sales channel to the consumer would help turn the business around.

In New Zealand, 83 per cent of health funding is provided by government.

Mr Fitzgibbon said the government would not be able to sustain that level of funding and the private sector would play a greater role.