The consolidation within the group accident and sickness market has created integration challenges for the surviving group accident and sickness writers, according to a special report by the A.M. Best Co.
The Canadian life insurance industry has continued its consolidation trend, with the country’s 20 largest writers of group accident and sickness business underwriting more than 95% of the business in this segment. There is potential for other medium-size carriers to gain market share as the larger organizations focus on integration activities. Furthermore, A.M. Best believes that group accident and sickness writers will need to continue to improve claims adjudication practices and customer service via investment in technology.
Reductions in regulatory constraints on mergers and acquisitions made both Clarica Life and Canada Life takeover candidates on Jan. 1, 2002. In 2002, Clarica Life was acquired by Sun Life, which enjoys the top market share position in group accident and sickness business as of year-end 2003. In 2003, Canada Life was acquired by Great-West Life. Canada Life maintains the No. 6 market share position as of year-end 2003.
In 2003, Great-West Life and subsidiary London Life reinsured the majority of their group accident and sickness business, thus dropping from the rankings of the top 20 companies and creating an anomaly between the premium totals for the industry and the top 20 companies.
In 2004, Manulife combined operations with Maritime Life, thus strengthening its No. 2 market share position as of year-end 2003. In 2004, RBC Life combined operations with Provident Life and Accident.
A.M. Best anticipates that the lack of scale and/or inability to succeed as a niche market player will mean the continued acquisition of smaller group insurers, albeit fewer are available, by large insurers. An example of a small group accident and sickness insurer market exit in 2004 was the announcement of Federated Life of Canada being acquired by Western Financial Group.
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