“The proportional market share of the biggest insurers increased as a result of either new business annual premium flow or a faster organic [growth] rate than that of the market average,” the report says. AIA and Tower are the top two insurers in the market, as measured by in-force annual premiums, and together held 36.96 per cent of the market at the end of 2010. These same two insurers held 23.34 per cent of the market at the end of 2006. “The group risk insurance market is becoming a battleground for those that have market share and those that do not,” the report says. The report finds the growth in the superannuation sector of the insurance market from 2006 to 2010 was in part due to the introduction of choice of fund legislation, and the prominence given by trustees to the underinsurance issue. IFSIB expects growth in the group risk market will be underpinned by Government reforms to the superannuation industry, particularly the proposal to lift the Superannuation Guarantee contribution from 9 per cent to 12 per cent. The results of consolidation and increased competition for members in superannuation will have wide-ranging consequences for the group risk market.

IFSIB says that the desire for super funds to differentiate themselves in order to attract members will extend to the insurance products they offer. “As funds continue to compete with one another in the market place, the scope for differentiation in group risk insurance products and services is gaining momentum,” the report notes. “This is partly driven by funds taking more time and deploying more resources to better understand member needs and tailoring group risk insurance products to better meet member needs at different life stages.” The report predicts the increased sophistication of insurance products offered to members will lead to convergence between the group risk and retail insurance industries. While IFSIB says products will become more sophisticated, it expects less complexity, with simplification of product design, especially around terms and definitions, limiting what it calls “the bells and whistles that are rarely claimed but add to the cost of insurance”.

The insurance broker also predicts that the pressures that competition puts on pricing will appear on the radar of regulators, with the Australian Prudential Regulation Authority (APRA) likely to take more interest in the pricing sustainability of group risk contracts. Along with identifying these shortterm trends, IFSIB says a number of key factors will shape the group risk industry in the longer term. These include super funds looking to revamp their operating models to obtain better alignment between their own administration and that of their insurer when it comes to insurance-related administration processes. IFSIB says the regulatory requirements aimed at increasing capital requirements for insurers are also likely to lead to more scope for co-insurance arrangements. Demographic changes and medical advances are also likely to change insurance products, along with moves to improve member engagement and financial literacy, especially with respect to insurance. IFSIB also sees an opportunity for third-party providers in the long term. This could focus on improving the delivery of contracted services, such as claims and underwriting, and could provide greater continuity when a fund transitions to another insurer.