In his incredible work of observational economics ("The Wealth of Nations") Adam Smith identified the tendency of business folk to collude. Since then it has been accepted that consumers have generally been better off when companies from the same industry do not talk to each other too much about certain things. But there are limits, and sadly, New Zealand is exploring those limits.
The only patchy coverage of the market that will remain if both the HFANZ and FSC lack major industry players from their memberships renders market data almost useless. Market data has been one of the main reasons for membership. Lobbying on common issues, such as potential legislation, promotional campaigns, standards, and tax matters are other useful services, but are less reliably valuable. These too will all suffer if reconciliation cannot be managed.
It would be a great shame.
But the associations cannot simply stand back and wait for insurers to return. They need to look hard at the value they deliver for the cost of membership. They also need to have better rules to manage friction between members. Recent disagreements should not form a long-run barrier to future co-operation - the next couple of issues to face insurers may see them all line up together to deliver a better outcome for all New Zealanders rather than splitting down the lines of different distribution channels as they have in the past.
The economics could be improved if the Healthfunds organisation were part of the FSC.