The group life insurance sector is expected to be between 60 and 100 per cent bigger than today after five years, the Financial Services Council conference in Melbourne has been told.
Quoting research and industry figures, MLC Insurance executive general manager Andrew Hagger said the group life sector would not struggle for revenue in the coming years.
“It is a $2.6 billion-a-year industry now, with growth of around 13 per cent a year, and it should be the fastest growing sector for the next five years,” he said.
“Revenue could grow between 10-15 per cent per annum over those five years. Industry funds offer the largest growth potential. There are great opportunities but there are also challenges which must be faced,” Hagger said.
Hagger said he had rung ‘round the industry and had identified six key imperatives that had to be faced if the industry was to take full advantage of its potential: pricing; industry fund consolidation; regulation and capital constraints; claims management; making it easier for customers; and advertising/marketing. He said all six imperatives needed to be addressed in a co-ordinated fashion by both individual companies and the industry in general.
In particular, Hagger said the industry was facing a major challenge in getting good claims management professionals, and just taking them from other companies was not the answer.
“We have to take in new people and train them to do the job to keep claim standards high,” he said.
Hagger added most group insurance mandates were judged on price, claims management, and relationships.
However, First State Super chief executive officer Michael Dwyer told the conference that technology was a key factor in terms of keeping costs down across the board, and that relationships were important.
“The challenge for the group insurance industry is to offer fund members the best and most appropriate protection at a reasonable price,” he said.
Dwyer said he was critical of the group life insurance industry as there had been a lack of product innovation in the past 20 years, although he was also puzzled by the Cooper recommendation to keep trauma (critical illness) insurance outside of group schemes.
He was also critical of the past year, when there had been three major reviews affecting the superannuation and group life insurance sectors with no apparent co-ordination, which had “upset the population”.
Both Hagger and Dwyer said industry fund consolidation must occur, with Dwyer identifying more funds with 1 million plus members as a likely outcome.
