Industry super funds and employer master trusts are likely to see the strongest growth in the risk insurance market during the next 15 years, according to Rice Warner.
The projected growth rate of 10 per cent per annum in both sectors is largely down to demographic factors, with a higher proportion of new people entering the workforce and going into employer-based superannuation, according to Rice Warner director Richard Weatherhead.
"[The growth in risk insurance] will be more through this channel and less though advisers. The winners are going to be [employer-based] funds at the expense of advisers," Weatherhead said.
The increased take-up of single-issue advice through superannuation funds will contribute to the growth of risk insurance in employer-based super, he added. This will be especially true under the MySuper regime, since it will be possible to include the cost of intra-fund advice in the administration fee.
By 30 June 2021, 20 per cent of the market (in annual premiums) will consist of risk insurance in MySuper, according to the report.
"Free advice or advice for $250-$274 will be a lot more successful than holistic advice provided by a financial planner," Weatherhead said.
However, while financial planners will struggle to sell insurance inside superannuation, they will be more than compensated by the growth in retail risk insurance sold outside super, which Rice Warner predicts will grow by 9 per cent per annum up to 2026.
The concessional contribution caps will make it more attractive for wealthier Australians to have their risk insurance outside superannuation, which will allow them to make a full $25,000 contribution each year, Weatherhead said.
The high levels of underinsurance in Australia will continue to underpin the growth in the $10 billion risk insurance market, which Rice Warner projects will more than double in the next 15 years. However, near double-digits of growth would not continue forever, he warned.