Wholesale Insurance market at tipping point

Rice Warner releases latest Wholesale Insurance Market report.

Converging issues are shaping as a tipping point between cost and opportunity for Australia’s  $4 Billion wholesale risk insurance market.

Today’s comprehensive Rice Warner Wholesale Insurance Market Report shows a market under pressure from increasing claim rates, price compression through intense competition and product definitions that have failed to adapt to social and employment trends.

Yet there is flip side of opportunity for market participants, as member/employee participation rates in certain market segments remains low and open to new methods of engagement and upselling, said Richard Weatherhead, Principal at Rice Warner.

“Broadly speaking, the insurance cycle has now well and truly turned, with wholesale death and total and permanent disability prices having increased by 10% across the industry over the past year. Life insurers, superannuation funds and employers are beginning to review the wisdom of generous insurance contract terms – such as options to increase cover without underwriting – and the traditional very broad definition of total and permanent disability.

“More pain is to come with some major funds due to announce price increases in the near future,” Mr Weatherhead said.

Yet despite recent price increases, wholesale insurance cover is, on average, significantly cheaper than the equivalent cover in other market segments.

Rice Warner’s report provides a comprehensive breakdown of the wholesale insurance market and explores key trends, including market growth, insurer margins and the impact of Stronger Super.

Whilst recent and impending price increases are a vital step in moving to a more sustainable industry, average cover levels have done little more than keep pace with earnings. The proportion of members/employees taking up voluntary cover is broadly unchanged, so there remains significant opportunities to better meet insurance needs through customer and member engagement, including targeted offers of personal risk insurance advice.

The report also includes comprehensive analysis of product features, benefit levels and prices across the wholesale risk insurance market.  It is based on the annual Rice Warner survey of superannuation funds’ insurance products and services, showing coverage levels, insurance services provided and the financial advice services provided in relation to risk insurance.