Potential mergers of large superannuation funds will not impact the group life insurance market and have the potential to grow with the Federal Government’s MySuper proposals.

“The group insurance space is very competitive and will remain so,” Financial Services Council CEO John Brogden told insuranceNEWS.com.au.

“If MySuper-style products become available, then default superannuation funds will become similar and life insurance will become the point of difference.”

Mr Brogden says consumers will be looking for the different features offered by group insurers as part of their selection of a default superannuation fund.

“More [default] superannuation funds on offer will open up more opportunities for group insurers,” he said.

“I suspect group insurers in Australia will become larger and more successful as a result of these moves.”

The rationalisation of large superannuation funds has started with First State Super and Health Super announcing a merger.

Each fund has different group insurers: First State was with Metlife but has switched to Tower this month; Health Super’s group insurer is AIA.

The premiums in the group market are very competitive and Tower will be looking at an annual income of more than $75 million from First State.

But pressure will be put on group insurers to become more competitive with premiums as the joint announcement by the two super funds cited better insurance benefits as a key outcome from the merger.