MEDIA RELEASE ‘Retail life insurance set to dominate risk market landscape’

MEDIA RELEASE ‘Retail life insurance set to dominate risk market landscape’

  • On 29/01/2014

Rice Warner releases new Risk Insurance Market Projections Report.

 Retail market participants in Australia’s $12.4 billion risk insurance sector are increasing their grip on future growth potential, spearheaded by new, low cost personal superannuation products.

This is a key insight with the release today of Rice Warner’s Risk Insurance Market Projections Report 2013.

The report reveals a dynamic market with growth of 5.1% per annum after inflation over the next 15 years.  However, the retail component of the market is expected to achieve stronger overall growth.

Risk insurance sold through personal superannuation will grow at the rate of 6.7% per annum in real terms, faster than anticipated in previous research and reflecting the growth of bank-developed ‘low-cost’ superannuation products to compete directly with not-for-profit funds.

As a result, industry fund, public sector fund and employer master trust insurance will grow more slowly than other segments.

Overall sector growth is healthy at 5%, and is despite significant challenges facing the industry in the short term: higher claim and lapse rates and the consequences of lax product terms in the past.

Rice Warner predicted in 2013 a convergence of prices between market segments, primarily reflecting price increases within industry funds and other employer-based superannuation risk insurance arrangements.

“This has certainly occurred, with several superannuation funds announcing price increases in excess of 50% and, in some cases, over 80%”.

“The major trend in the composition of the market in the future will be the growth of low cost personal superannuation products, marketed by the banks and wealth managers, with risk insurance cover in this segment growing accordingly, at the expense of other segments,” Mr Bareau commented.

Other key points:

  • Risk insurance is now a $12.4 billion market that will more than double (in today’s dollars) in the next 15 years.
  • Future growth of 5.1% per annum (after inflation) will be much more subdued than the 9.9% per annum achieved over the last 15 years.
  • The corporate standalone risk insurance market will grow at 6.5% per annum in real terms, driven by employers wishing to provide cover for employees and, in some cases, arranging this outside the traditional superannuation environment, providing greater flexibility of product design and avoiding the complexity of managing concessional contribution limits.
  • By 30 June 2028, 60% of the market (in terms of amount of cover) will be retail business and 40% wholesale business.  This compares with 45% retail and 55% wholesale at 30 June 2013.