The group insurance market has been growing by an average of 12.5 per cent per year for the last 15 years, according to Rice Warner Actuaries, but some opportunities are being missed.
In its recently released Group Insurance Market Report 2009, Rice Warner suggests the rate of growth in the group risk market is set to continue; the actuaries forecasting 11.3% per annum growth over the coming 15 years in a sector that has an annual revenue of $2.4 billion.
… opportunities for advisers and insurers to provide more insurance cover under group risk polices are being missed…
But as rosy as these numbers are, opportunities for advisers and insurers to provide more insurance cover under group risk polices are being missed, with Rice Warner suggesting that:
- Only 7% to 10% of active group insurance plan members hold voluntary death and/or TPD cover in excess of the plan default level; and
- Less than 30% of members of industry and public sector superannuation funds have income protection/salary continuance cover through their fund
If the group risk market has been increasing at a rate of 12.5% per annum on average, then how much more potential may there be for advisers in group risk if this growth includes such low levels of cover being underwritten above the automatic acceptance/default levels?
Rice Warner reports that advancements being made in the group risk arena, particularly in the area of technology, are leading to better quality service experiences for both the employer and the members. These include:
- Smart application forms
- Insurance needs calculators
- Case/membership application tracking
- Automated underwriting solutions
The actuaries also point out that the growing trend in automation in the group risk sector ‘… will permit a quantum improvement in the quality of member records; giving insurers and funds the ability to gain deeper insights into underlying experience which, in turn, will permit pricing of insurance to be based on more credible and granular data.’
Pricing is another point of differentiation on which Rice Warner focuses, highlighting the fact that, notwithstanding the value of advice (which is factored into retail insurance rates, but not group rates):
- The median price of group death, death and TPD and income protection cover through industry funds, public sector funds and employer master trusts is around half that of the equivalent ‘adviser sold’ cover
- The median price of death and TPD cover through industry funds and public sector funds is similar but is more expensive through employer master trusts by 10% – 30%, except at advanced ages
Looking to the future, Rice Warner predicts that the consolidation of superannuation funds will continue, placing more pressure on insurers and advisers to retain as many of the diminishing number of large clients as possible, and that it is the insurers who can be ‘nimble and innovative’ who will be best positioned to benefit from considerable opportunities in this market.
