The group life insurance market will grow between 60% to 100% during the next five years, says MLC Insurance Executive GM Andrew Hagger.

“The market is worth $2.6 billion and provides cover for 9 million Australians,” he said at the Financial Services Council conference in Melbourne last week.

“It is the fastest growing segment in the life insurance industry with growth of about 10% per annum.”

Mr Hagger says the biggest area of growth will be in the industry superannuation funds, but there are some issues facing players operating in the segment.

“A major issue is price, and while there has been a cycle of profitability in group insurance, the yields are now low,” he said. “The margins are getting lower at present and this is being done through lack of pricing knowledge by some players.”

The industry funds are also pushing prices down in insurance tenders and they also want to see more operating efficiencies from insurers, particularly in areas such as claims management.

Mr Hagger says life insurers will also have to face superannuation fund consolidation, which could means the loss of accounts after a merger.

“A life insurer wants to make sure they will be right side of an industry fund consolidation,” he said. “If an insurer loses a fund, there are lots of fixed costs that cannot be recovered.

“For the life insurer who wins from a consolidation, the takeover costs of the insurance account will be substantial.”

Consolidation has also occurred with life insurers, and this has put pressure on recruiting claims professionals, Mr Hagger said.

“There is only a limited pool, and if we keep poaching people there won’t be enough claims people to grow the industry,” he said.