Rice Warner's latest risk insurance projections report points to further growth for the industry. Rice Warner's Richard Weatherhead highlights the key findings.
Over the 15 years to 30 June 2024 the total risk insurance market (in annual premium income terms) is projected to reach $33,283 million per annum, compared with $8,187 million at 30 June 2009.
This represents an increase of 9.7 per cent per annum over that period. In real terms (2009 dollars) the market is projected to reach $21,363m per annum, a real growth rate of 6.6 per cent per annum over the period.
The average level of death cover provided per head of the working age population is projected to increase from $196,000 at 30 June 2009 to $403,000 (in 2009 dollars) at 30 June 2024, an increase of 106 per cent. This, on average, represents around 5.4 years earnings.
The average level of income protection cover per head of the working age population earning more than $22,000 per annum is 19 per cent of average earnings, compared with a level of 75 per cent or more which would be appropriate for most such people.
However, levels of income protection have increased from 15 per cent of average earnings at 30th June 2008, driven by the introduction of default cover for some funds and an increased focus on income protection across the market.
Whilst significant volumes of risk insurance business will continue to be written inside superannuation, the overall proportions of business inside and outside superannuation, measured by sums insured, will stabilise with 67 per cent being inside superannuation.
The fastest growing segments will be with employer master trust risk insurance (17.1 per cent per annum) and industry fund risk insurance (11.6 per cent per annum);
Direct risk insurance, sold via outbound telephone calls, mail, the internet and branches/shopfronts and other channels, is projected to become increasingly important in terms of business volumes, with annual premium income growth of 9.9 per cent per annum in future dollar terms.
However, it will be relatively stable in terms of market share, given the growth in other market segments.
The growth in the market will be driven by a combination of:
- continuing innovation in the delivery of both full and limited financial advice;
- further increases in default levels of risk insurance by superannuation funds;
- improved communication with superannuation fund members and the delivery of financial education;
- technology improvements, making it easier to obtain advice and to buy;
- improved auto-underwriting and other risk management techniques and product designs, taking the pain out of the application process;
- improved customer databases held by superannuation funds and insurers, thus facilitating better target marketing and direct distribution; and
- continuing competition, both between existing insurers and from new niche insurers entering the market, keeping costs and prices down.
