When I began working for an insurance company in 1962, 60 years ago, there was only a handful of companies such as AMP, Colonial Mutual, National Mutual, Mercantile Mutual, MLC, City Mutual, Legal & General, and SGIO. Most companies were mutual, mutual meaning that there were no shareholders and the companies were owned by the policyholders. The policies issued had a savings element as well as life cover.
Over time the cash value of the savings would equal the insurance value. The premiums were fixed. The policies were known as an Endowment, which is paid out after a certain period of time or to age 60, or Whole Life Insurance that is paid out at death or age 85. All profits were passed back to the policyholders by way of bonuses, which would add to the life insurance cover that was taken initially. Once the bonuses were added to the policy, they were guaranteed, and the investment behind the policies was called a capital guaranteed investment fund. Insurance companies also managed superannuation funds that initially were endowment policies to mature at 65. Around the mid-70s, investment companies entered the marketplace to stave off competition, and insurance companies jumped into the investment business. Superannuation funds changed from insurance policy type funds to investment funds. To raise capital, insurance companies demutualised. All companies were then owned by shareholders and chasing profits.
The old life insurance that is Endowment and Whole of Life was put aside. Only insurance cover known as Term or Temporary Insurance was marketed with separate investment funds as the savings element. The banking industry noted the profitability of the insurance companies, and in a relatively short period, most insurance companies were owned by banks. Whilst endeavouring to grow their investment and insurance business, the management dropped the ball in providing little or no service for the fees they were charging and recently suffered under the Hayne Royal Commission by reimbursing clients to the tune of billions of dollars. Banks have now exited the insurance and some of the investment scene. Most insurance companies have now merged or been sold to international insurance companies from Japan, China, the UK, and the USA. In their heyday, around 40 insurance companies were operating in Australia. Today we’re back to a handful.
“Plus ca change , plus c’est la meme chose”
The more things change, the more things stay the same.
Bob Fowler