MLC Life Insurance will replace its legacy back-office systems under its takeover by Nippon Life.

CEO David Hackett told insuranceNEWS.com.au the business will be transferred from NAB computer systems to a new network.

“Part of the deal is separating the life business to a new standalone system, and we are excited about that,” he said. “What we have been doing in the run-up to the takeover is taking the non-life business off the MLC system, such as super.”

Mr Hackett has praised Nippon for taking action on the legacy computer system – a problem many of MLC’s competitors still face.

“The future back office will enable us to develop new policy administration and claims systems. It has been difficult to replace legacy systems when you look at the money to be invested and the return, but we had to do it as part of the transition.”   

NAB will hold on to 20% of MLC and the brand will be kept for up to 10 years.

The bank received $4.2 billion for selling its majority stake, plus a $200 million dividend from MLC.

Mr Hackett says Nippon will help MLC with product development and other growth ideas.

“We haven’t been totally ignoring product innovation, but hopefully over time we will benefit from Nippon’s business model. While insurance is a local business due to the laws of the land, in many other countries insurers have rolled up health, life insurance, savings and aged care into their business models.

“Nippon is more active in older-generation products and in Australia we are seeing movement in tax incentives for comprehensive retirement products.”

Mr Hackett says MLC has offered annuities but offering whole-of-life products – which only life insurance companies can do – is too expensive due to low interest rates. Tax changes could put this back on the radar.

One area of possible product innovation involves extending the age cut-off for most life insurance policies. In group life there is an automatic cut-off at 65, and it is similar for most individual retail products, although there is the ability to extend cover at a cost.

“While we won’t be able to do a lot of product innovation in the next two years as part of the transition, we do need to look beyond that period,” Mr Hackett said.

“While life cover tends to end at 65, we would like to look at pushing that to 70-75 years in the future.”

Mr Hackett confirmed MLC’s reinsurance arrangements will remain in place, but they will be reviewed in future, because the life insurer now has a strategic partner with stronger risk appetite.