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Aviva PLC. takeover of AIG Life UK investigation 2024

The Competition and Markets Authority (CMA) has launched an investigation in to whether the proposed takeover of AIG Life UK by Aviva PLC. would impact consumers and policyholders

A photo of Daniel Sharpe-Szunko, the author

By Daniel Sharpe-Szunko

Published on: 9 February 2024

4 min read

Aviva takeover of AIG Life UK investigation

In September 2023, Aviva PLC. announced that it would be acquiring AIG Life UK for just under £500 million in 2024. The takeover of AIG Life would include 1.3 million individual life insurance customers and 1.4 million group or corporate life insurance policies.

There have been major concerns from many industry experts and financial services professionals, that this would lead to a significant loss of choice and competition for British households. By combining these two life insurance giants, there would be fewer options for consumers wanting to buy life insurance to protect their families.

Our team of financial experts posted about the takeover on the 25th of September, where we expressed our own concerns about the deal. In this latest article, we look at a new investigation of the Aviva deal to be carried out by The UK Competition and Markets Authority (CMA).

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60-Second Summary – Aviva and AIG Life £460 million deal to be investigated by the CMA

Whenever a major deal of this kind happens, it is a standard part of the process for there to be some questions and often investigations in to the impact on the wider industry. In this case, the watchdog (CMA) has launched an internal investigation in to the deal, questioning whether it causes ‘substantial lessening to competition’..

  • AIG (American Insurance Group) was one of the top 5 life insurance providers in the UK prior to the announcement of the proposed acquisition by Aviva PLC.
  • Aviva PLC. is already considered to by the number one life insurance and general insurance provider with a significant market share in the UK.
  • Life insurance in the UK has seen several major departures of well-known brands in recent years, including Aegon, Canada Life, Friends Life and Old Mutual Wealth.
  • Consumers have been left with questions over existing policies and a significant loss of options when applying for new life insurance policies.

This investigation by The UK Competition and Markets Authority (CMA) was launched in February 2024 to provide clarity about whether the deal would ‘reduce competition within the UK markets for goods or services’.

A deal of this magnitude in the UK life insurance industry could see a significant impact on consumers looking for life insurance or other protection products for their families. The departure of a major brand within any sector or industry automatically causes questions about how that might impact consumer choice and competition.

AIG Life UK operates as a subsidiary of American International Group as AIG’s UK protection business. AIG Life is currently regarded as one of the cheapest and most competitive life insurance brands in the UK.

By Aviva acquiring a competitor, this automatically reduces the need for competitive pricing and innovation of new products.

A consumer looking for life insurance will naturally want to compare prices and products from several if not all of the top insurance providers. The acquisition of AIG Life by Aviva, could mean:

  • Less competition for lowest premiums
  • Fewer insurance providers to choose from so less choice
  • Products being removed from the life insurance market
  • Less need for innovation to compete with each other
  • Significant increase to market share by Aviva (dominant position)
  • Existing policyholders could lose benefits

Naturally, any takeover of this magnitude would cause major questions among industry experts and governing bodies about how this might impact consumers. Unless there are clear plans and strategies in place to mitigate these risks, then the watchdog may rule against the merger.

It was noted in several life insurance industry publications that an Aviva spokesperson commented “It’s typical for transactions (such as these) to require regulatory approval and this deal is no different. We continue to expect the transaction to complete in the first half of 2024 subject to regulatory approvals, and we will provide an update in due course”.

The purpose of the acquisition according to Aviva, was to build on its momentum in the UK life insurance market, complementing its existing “focus on innovative solutions and strong partnership distribution”.

Our own MPO financial experts are seriously questioning Aviva’s agenda through this deal and its impact on consumers. Some of the commentary around the acquisition seems to be very soulless, which is less about consumers and more about market domination.

They mention that the new combined businesses will create a more efficient process for consumers, but whether this is really true remains to be seen. It currently seems that the main focus is on ‘strengthening prospects’ and the potentially significant strategic and financial benefits for Aviva.

The investigation by The UK Competition and Markets Authority (CMA) will be carried out over the next several months. The findings from the initial part of the investigation will be announced on 8th April 2024.

If further questions remain unanswered, then there is likely to be a second phase for this enquiry from April 2024. It is likely that the full investigation will be completed by the middle of 2024, in time for the proposed deadline by Aviva PLC.

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Is it worth paying for life insurance?

Yes, if you’ve got children or financial dependents then you should have life insurance to protect them if you die. Martin Lewis and the Financial Conduct Authority recommend that you take out life insurance to protect your family and your home. Generally, life insurance premiums start from as little as £5 per month and will be cheaper for younger adults.

Common myths about life insurance:

  • Life insurance won’t pay out (pays out 98% of claims)
  • People with medical conditions can’t have life insurance
  • Life insurance is expensive
  • Savings can be just as effective as life insurance
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Is life insurance worth it? - MPO

What is the average cost of life insurance per month?

Based on recent research carried out, the average cost of life insurance is approximately £38 per month and the average level of cover is £152,000. Life insurance premiums also vary dramatically from one insurance provider to another and you can reduce your monthly premiums by shopping around.

Fundamentally, life insurance premiums vary depending on your age, health and the amount of cover that you need, starting from as little as £5 per month. You can also get life insurance to protect your family and your home against financial loss if you die.

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Average cost of life insurance - MPO

What does life insurance cover you for?

Life insurance is a monthly renewable ‘term insurance’ contract that pays out a cash lump sum or regular payments on death to your family or beneficiaries. Policies are most commonly used for family protection or mortgage protection for your loved ones if you die and your household income reduces, plus the additional issues of losing a parent or carer.

Traditional life insurance will not exclude any pre-existing medical conditions and will cover suicide after 12 or 24 months. You can also use life insurance for business protection purposes as well as tax-efficient business life insurance for directors or key people.

What are the disadvantages of life insurance?

The biggest and most common problem that consumers have with life insurance is the cost and the monthly premiums. This is the top reason for policy cancellations and why more people don’t take out life insurance to protect their family.

Another key disadvantage with life insurance is that it holds no investment value, nor can you cash it in. Life insurance works like any other traditional general insurance policy (e.g. car insurance, house insurance, pet insurance etc.), you pay a monthly premium and it will pay out in the event of a claim. Some people decide to use savings instead of taking out life insurance but you need to make sure that you have sufficient savings to cover the costs of death for your family.

Why do I need life insurance?

The fact is that nobody actually ‘needs’ life insurance, but it is strongly recommended that families and couples have cover to protect their loved ones in the event of death. Martin Lewis recommends life insurance and says “this is something that every parent, partner, or person with any other type of dependent needs to consider”.

Life insurance financially protects your loved ones if you die and pays out a cash lump sum to repay your mortgage, pay for school fees, replace lost income, and pay for regular outgoings. Mortgage life insurance is not linked to your mortgage debt so you can use it to pay off some or all of your mortgage.

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