Last Thursday was momentous for group insurance, with First State Super informing MetLife that it was taking its $70 million annual premiums elsewhere, ending a  17-year relationship.

After a tender process run by Rice Warner, First State Super’s new group insurer will be Tower Australia. It’s the most significant piece of new group business for Tower since it wrested AustralianSuper away from CommInsure in September 2009. Competitors’ hopes that that $200 million-per-year win would cause  ‘indigestion’ – an extended inability for Tower to take on new clients – have now been dashed.

It’s understood First State Super (FSS) has requested Tower come ‘on-risk’ and start receiving premiums almost immediately, and roll out a new benefit design to members after that. Tower began underwriting AustralianSuper’s group risk in November 2009, just weeks after its tender win, however the higher cover levels and boosted auto-acceptance limits did not reach members until the following April. FSS chief executive, Michael Dwyer, was unavailable for comment yesterday on whether this would be the case for his fund.

The change of group insurer has come just days after the $20 billion FSS announced its intention to merge with the $8 billion Health Super, whose group insurer is currently AIA. The completion of the insurance tender against that backdrop made observers speculate that Tower would soon have an opportunity to contest the contract for the bigger merged fund, shortly after it’s due to come into being on July 1, 2011.

It’s understood that Tower’s willingness to ‘let go of the pen’, and for instance allow Superpartners to assess income protection insurance claims on behalf of AustralianSuper, has been a factor in its big recent wins. The FSS win sees it gain ground on AIA, still the country’s largest group insurer in terms of premiums-in-force.

The FSS group insurance tender is in fact not the largest that Rice Warner has been running. That honour goes to SunSuper, where Suncorp is defending a contract worth more than $100 million in premiums per year – roughly 90 per cent of its Australian group insurance business. A decision  in that tender is due next month.



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