Group life insurance pricing is becoming more reasonable but it is still a competitive market, according to Aon Hewitt Head of Health and Benefits Matthew Brown.

“There has been a lot of talk about insurers grabbing market share but we are starting to see some more reasonable pricing,” Mr Brown told the AIA group insurance summit in Sydney last week. “There is a genuine interest in pricing the risk reasonably.”

However, he believes the industry’s three-year rate guarantee model may create profitability problems.

“The guarantee period of three years is too short if claims go south, especially if insurers are looking to pick trends,” Mr Brown said. “We could see rate periods reduced and some insurers are looking at that.”

Mr Brown says the retail space guarantees prices for one year.

RGA Reinsurance Company of Australia VP Business Development Andre Dreyer says all areas of life insurance are feeling the heat on pricing.

“Reinsurers are also having to sharpen their pencils,” he said. “But there are questions on sustainability and the Australian Prudential Regulation Authority (APRA) is questioning profitability.”

Mr Dreyer says there is more innovation in the group life market but the question is: who is taking risks with pricing?

Another issue clouding the pricing debate is data quality, with more insurers expressing concern at the information available from super funds.

Mr Brown says data from corporate super funds is better than larger funds.

“The big funds are good at compiling data on members but what is coming across in insurance is not so good,” he said. “The regulator’s prudential standards don’t seem to be on to this either.”

Mr Brown says there must be more focus on insurance data in the group industry, and “it would also help if everybody was to standardise the data”.

Mr Dreyer says data quality has been a challenge for many years. “We have seen 20 years of growth in the super industry and data for insurers wasn’t the first thing on people’s minds.

“If APRA is not happy with the data we could see another capital requirement being introduced if we are not careful. But we are seeing more insurers try to reach a common standard for data.”