More than a decade of strong growth is predicted for the group insurance sector, according to Rice Warner Actuaries.
The actuarial consultancy firm has released a new report which predicts that the wholesale insurance market will grow at a rate of 11.1% per annum over the next 15 years.
Richard Weatherhead, Director and Head of Life Insurance at Rice Warner, said the growth was likely to come from individual member increases rather than broad, default cover level increases.
The growth we’re seeing is the result of a continued commitment by funds to engage and educate members
“The growth we’re seeing is the result of a continued commitment by funds to engage and educate members, in particular through the increasing use of improved member analytics that help in tailoring insurance solutions to the needs of individual members,” said Mr Weatherhead.
“Couple this improved ability to assess member needs with other factors and it is clear to see why there is a growth story at play.”
Mr Weatherhead also attributed the growth to an increased availability of cover through online, telephone and other technology-based needs assessment. The report likewise highlighted the impact of regulatory change, saying it was likely to lead advisers to recommend wholesale insurance arrangements more frequently in the future.
However Mr Weatherhead cautioned that, despite the growth predictions, the highly competitive nature of the Australian wholesale insurance market has resulted in gradually reducing profit margins for insurers, making the sustainability of insurance prices an increasing concern for both insurers and trustees.
“The recent deterioration in claims experience, particularly for death and income protection business, suggests that there will be upward pressure on prices in the future, running counter to the more recent experience in which prices have reduced by around 5% per annum.
“We also believe that the lower margin environment will lead to further concentration of wholesale insurance providers, leaving a smaller number of insurers who will have the scale, resources and focus to ride through the insurance cycle,” he said.
