Group insurers with the ability to manage larger sum contracts from fewer funds are better positioned than most to grow in the continually evolving market, according to actuarial consultancy, Rice Warner.
In a new analysis, released this month, the consultancy has pointed to its latest Wholesale Insurance Market report to outline what it sees as underlying structural tensions - the biggest insurers getting bigger, operating on decreasing profit margins and seeking to service heightened claims, pricing and product demands from the underlying funds.
"The significance of scale in the wholesale risk insurance market cannot be underestimated," the analysis said.
"To put the market in perspective, the wholesale segment accounts for a third of risk insurance policies by revenue sold in Australia, and over half of the market (55 per cent) in terms of the cover provided to Australians via their superannuation fund.
"In a nation of underinsured citizens, many owe what risk cover they have (including for example life insurance, trauma and income protection policies) to their superannuation fund membership. Around 12 million Australian fund accounts are insured via this wholesale means."
The analysis said that, in revenue terms, the wholesale (otherwise known as group) risk market represents a "healthy $5 billion annual segment" but notes that "the market sustains just a small and shrinking number of product manufacturers".
"The wholesale insurance game has become one of scale, as manufacturers develop the required infrastructure to support new client needs. This, coupled with the merger trend amongst superannuation funds, means those insurers with the capability to manage larger sum contracts from fewer funds are best positioned," it said.