The proposed merger of AGEST Super and AustralianSuper will initially leave their separate life insurers in place.

An AustralianSuper spokesman told insuranceNEWS.com.au its insurer TAL, and CommInsure at AGEST, will remain subject to the merger proceeding.

“If the funds merge, there will then be a review of the insurance arrangement as part of normal procedure of reviewing our insurance provider,” he says.

Both insurers provide a full range of cover to members of the funds.

The merger is not guaranteed unless the Government grants capital gains and losses tax relief when AGEST assets are transferred to AustralianSuper.

“The AGEST board has approved the merger, subject to receiving capital gains tax rollover relief,” CEO Cath Bowtell said.

“Without rollover relief, the merger will not occur.”

She says every month the merger is delayed will cost the fund $1 million in administration savings for members.

AustralianSuper CEO Ian Silk says that unless the Government agrees to change the capital gains tax position for funds, many merger proposals will be scrapped – a move the life insurance industry would not be too upset about.

Group life insurers have privately expressed concerns about the power the merged funds will have when negotiating new cover and the diminishing pool of potential clients.

The Australian Prudential Regulation Authority is also concerned about the pressure on pricing in group life mandates and its effect on the profitability of contracts.