Speculation is growing that the Commonwealth Bank (CBA) may pitch its $1 billion general insurance business to four major insurers in the local market as early as next year.

Ratings agency S&P says Westpac's recently announced sale of its general insurance business to Allianz is among the final steps by the major Australian banks to exit non-core businesses like general insurance.

Australian media has reported that investment bank Goldman Sachs has been hired to sell CBA’s insurance division, which may attract interest from bidders including Suncorp, IAG, QBE and Zurich. The Australian newspaper says CBA is expected to launch the sale of its general insurance unit in the first quarter of next year.

Westpac agreed a $725 million sale deal with Allianz for mid-2021, and CBA said in 2018 it was also considering selling its general insurance operations. The Westpac deal includes a 20-year agreement for the distribution of Allianz general insurance products to the bank’s customers.

S&P analyst Craig Bennett says buyers of the CBA business will typically be from the larger insurers already in the market looking to expand their footprint, or extend their distribution via bank channels.

"It will likely come down to the price being offered and long-term alignment of interests if there is a distribution agreement attached,” Mr Bennett said.

It could also be used as a platform for smaller, emerging companies that have lacked underwriting experience.

CBA is facing a number of legal cases, including a class action, which allege it tipped customers into inappropriate insurance policies.

The Australian newspaper says IAG could be eager to buy the business after new CEO Nick Hawkins told staff when he was the CFO that mergers and acquisition activity was on the agenda.

Meanwhile, QBE has said it may postpone major strategic moves as it searches for a new CEO after the departure of Pat Regan.

CBA's life insurance operations were sold to AIA Group in 2017 for $3.8 billion, while ANZ Bank completed the sale of its life insurance business to Zurich last year. NAB finalised the sale of 80% of its life insurance business in 2016 to Nippon Life for $2.4 billion.

CBA also sold a 55% interest in its Colonial First State wealth management business to Kohlberg Kravis Roberts for $1.7bn in May.

"While general insurance is not as capital-intensive as life insurance, a similar strategy is expected as [CBA] continues to restructure," IBIS World Senior Industry Analyst Yin Yeoh said.

The scale needed to run viable general insurance arms may be another factor as banks find it hard to compete with the big four insurers in Australia.

"General insurance is a narrow-margin business that requires capital support," Digital Finance Analytics analyst Martin North says. "Scale players have dedicated underwriting and claims management processes and systems. General bankers are not as capable [as] insurance managers.”

CBA’s income from insurance fell 5% to $139 million on a cash basis for the year to June 30. General insurance contributed $21 million to the bank's group cash net profit, down 40% from a year earlier.