– Not positive for customers – E24

Halger Kvadsheim believes that the merger of Fremtind and Eika takes away the competitiveness of small companies in the market.

On Tuesday it became known that one of Norway’s largest insurance companies, Fremtind Forsikring, will merge with smaller player Eika Forsikring to form the new company Fremtind Forsikring.

This could weaken competition in the non-life insurance market, says civilian economist Halger Kvadsheim, known from the TV show Luksusfallen.

– This is not positive for customers. However, it does not contribute to increased competition in the market, says Kvadsheim.

In the past, Eika, with its 4 percent market share, was part of the smaller players in the insurance market alongside Storebrand, Friende and KLP. Now the company disappears from this group and becomes part of the Big Four insurance companies.

It is foolish to weaken small business ties, he says.

It may affect prices and service offerings

With Fremtind taking 15 per cent and Eika 4 per cent of the market, this would give a total market share of 19 per cent, and mean the four biggest players dominate around 80 per cent of the market.

Kvadshim believes that depriving small businesses of competitiveness can have consequences for prices and service offerings.

– Small players are under more pressure on price, and also score higher on service and customer offerings. He says Eika doesn’t necessarily get that high a rating, but rather goes to a company with a worse rating.

However, the merger will enhance the customer experience, says Fremtind’s director of communications, Christine Vittlesiter.

-We are not satisfied with the results of some of Fremtind’s customer satisfaction measurements. However, our measurements after claims settlements show a very high level of customer satisfaction, so in addition to being there for customers when they need us, we will also work with banks even harder to ensure they are satisfied throughout the entire customer journey, she says.

Overall “bad competition in Norway”

Nye Fremtind Forsikring will become the underwriter for some of the largest banks such as DNB and Sparebank 1.

Kvadsheim compares the Norwegian market to the English market, where most sales are made on price-matching services, a competitive factor.

Norway differs from other countries by the presence of these external actors, so competition in the market is also worse, says the economist.

The merger depends, among other things, on “the necessary authority approvals without significantly onerous conditions” and must be approved by the Competition Authority.

– Eika doesn’t appear to be the biggest price pusher or innovation leader, so a merger could happen, says Kvadsheim.

The companies themselves state that they consider the risk of the merger not being implemented to be low. A final agreement is scheduled to be entered into early in the first quarter of next year. The combined company will still have its head office in Oslo and will have around 1,350 employees.

– Depends on the strategy

Nordea’s investment director Robert Ness believes that based on the new company’s market share, nothing exciting will happen in the market as a result of the merger.

– The market probably will not change significantly as a result. This will likely be driven more by the operational side, and depends on the strategy they put forward, Ness says.

The merger should be able to create a positive impact, so-called synergies, ranging from NOK 775 to NOK 930 million, according to the companies. Ness believes it is likely to have an impact on the market in the future.

For its part, Fagforbundet Finansforbundet is positive about the merger. “The merger strengthens the position of the ‘insurance in the bank’ concept, will bring significant synergies, and provide a better and broader offering to customers across the country,” a letter from the association said.