The number of insurers in the group life insurance market will reduce if the trend of superannuation fund consolidation continues, Tower Australia MD Jim Minto has warned.

“There are not many specialist (group) insurers in the market now and it is dominated by four larger players,” he told insuranceNEWS.com.au.

“If we end up with just 10 major superannuation funds in the next 10 years, as has been predicted, it will make it very hard for the smaller (group) insurers to survive.”

The four dominant players in the Australian group life insurance market are AIA, Tower, OnePath and CommInsure.

Mr Minto says the high cost of servicing this market will make it difficult for the smaller insurers to survive.

“The growing investment needed to service the larger super funds, as well as the rising cost of technology, will make it harder to the smaller players to maintain their service levels,” he said.

“These costs will also make it harder for a new player to enter the group insurance market.”

Mr Minto says the fund members could also be losers if the consolidation continues.

“If the numbers of superannuation accounts are automatically reduced in line with suggested new efficiency measures there is a risk some people will lose a large part of their existing protection,” he said.

“The industry needs to ensure good policy is developed to help avoid adverse effects like the loss of this much needed coverage.”

He cites the example where a person is a member of three superannuation funds, each offering $100,000 of automatic life insurance cover.

If the funds merge, the person could end up with just $100,000 of cover as a result.

“A family in such instances would have to turn to government, family and friends or a community-based organisation for help when life insurance could have offered an alternative,” Mr Minto said.