During the past few years, the life insurance industry in Australia went through rapid changes and reorganization. The environment of insurance firms was also altered irrevocably due to the progressive lifting of regulatory controls. In 15 years, Australia went on to become the least regulated financial sectors from being the most regulated one. Deregulation was inspiring the reorganization of the life insurance industry. Here we will be discussing the pattern of the evolution of the Australian life insurance industry.

The insurance sector is made of distinct markets which deal with different kinds of insurances. At the beginning of the 20^th century, 42 life insurance companies represented 30% of the sector’s asset. One hundred sixty-eight general insurers accounted for another 15%. The remaining share consisted of 200,000 superannuation funds for the remaining market.

The life insurance company has been characterized by high levels of concentration even though the levels have fallen in the late 20^th century.

In 1970, the five largest insurance firms were accounted for 85% of premium income. They accounted for at least three-quarters of the insurance policies sold in all of the last hundred years. The Australian Mutual Provident had been the market leader since 1849 when it was first established.

Life insurance mutuals were formed in Australia between the 1850s and 1880s when the private companies were failing to serve their customers. No new mutual funds were formed after 1881. The merger and consolidation of the existing mutual grew in the next hundred years into five dominating influential associations. One reason why this form of the organization continued for years was that it could deal more efficiently with the information lost problem.

The actions of these five firms prescribed the pattern of the growth of the life insurance industry for most of the 20^th century. The competitive relationship nature of these firms led to market behaviour that reinforced barriers and protected the market share of established firms. This changed in the 1950s when the life insurance companies started facing pressure from different sectors which led to the expansion of diversification of life insurance firms. Due to the market pressure that built throughout the 1950s, the insurance industry had to move back to peacetime activity.

The second period when new changes occurred was from the 1980s to 1990s. During this time, the exchange rates, interest rates, and restrictions on commercial activities were all lifted. The deregulation initiated a period of restructuring in the financial sector. The banking groups began to make up ground progressively lost during the 1960s and 1970s. Within the life insurance, the deregulation was associated with a shake-up of the industry. The number of insurers increased from 45 to 58 during the 1980s-1990s. This number will fall again in the 2000s back to 42 due to the new changes in the financial sector.