Risk outside superannuation set to grow at 9 per cent a year

Financial adviser-sold retail risk insurance outside superannuation is set to grow at 9 per cent per annum over the next 15 years, according to a Rice Warner report into the insurance market.

However, the fastest growing market up to 2026 will be business sold through industry super funds and employer master trusts, which the report claims will grow at 10 per cent per annum.

Rice Warner director Richard Weatherhead said that the banning of commissions on risk inside default superannuation, coupled with demographic changes, had placed financial advice practices that focus on employer superannuation under severe threat.

"The only way to survive in that situation is to develop an financial advice relationship with individual employees within the employer's concern," Weatherhead said.

The individual client relationship market also has huge potential for financial advisers, because it will retain the commission arrangement, Weatherhead said.

"It's only in the last three years or so that we've seen more and more financial advisers think about risk as a mainstream part of their business, whereas three years ago it was an adjunct to their business," he said.

But overall financial advisers will be fine, he said, because they will end up selling more risk outside superannuation - effectively "selling higher amounts to a lower number of people".

The tightening of the concessional contributions caps also make it more attractive for relatively wealthier people to have their risk insurance outside superannuation, which will benefit financial advisers, Weatherhead said.

He gave the example of a person entering retirement with $3,000 in insurance premiums to pay who wanted to contribute the maximum amount to their superannuation each year.

Rather than paying the premiums inside superannuation and being limited to a contribution of $22,000, it would make more sense to hold the insurance outside superannuation and contribute the full $25,000, Weatherhead said.

The high levels of underinsurance mean there are plenty of opportunities for financial advisers, Weatherhead said - although he added that the levels of near double-digit growth couldn't last forever.