The group life insurance industry is expected to grow strongly in the next 15 years, according to a new report by Rice Warner.

The growth will come from superannuation fund members increasing their cover rather than rises in the level of default cover, according to Rice Warner Head of Life Insurance Richard Weatherhead.

The report predicts the $3.2 billion group life market will grow at a rate of 11.1% a year over the next 15 years.

This is in line with 12.4% per annum growth achieved during the past 15 years.

“The growth we’re seeing is the result of a continued commitment by funds to engage and educate members,” Mr Weatherhead said, citing the “increasing use of improved member analytics that help in tailoring insurance solutions to the needs of individual members”.

He says increased use of technology-based needs assessments and the availability of cover online or through call centres is another element driving growth in the sector.

“Another factor is regulatory changes in the advice market, which are likely to lead advisers to recommend group insurance arrangements more frequently in the future,” Mr Weatherhead said.

While more people are increasing their levels of insurance, the majority still have inadequate cover despite the attractive premiums in group life.

Rice Warner cited the average cost of $100,000 of death with total and permanent disability insurance as having an annual premium of $126 or $2.42 a week.

These low premiums have been due to the highly competitive nature of the Australian group market that has resulted in reduced profit margins for insurers.

“The recent deterioration in claims experience, particularly for death and income protection business, suggests that there will be upward pressure on prices,” Mr Weatherhead said.

“We also believe that the lower margin environment will lead to further concentration of group insurance providers, leaving a smaller number of insurers who will have the scale, resources and focus to ride through the insurance cycle.”

According to Rice Warner, eight insurers account for 93% of revenue and the top four increased their annual premium income to lift their combined market share from 56.9% last year to 66.4% this year.