APRA and ASIC Address TPD Insurance Sustainability Challenges
Navigating the Future of Total and Permanent Disability Insurance
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In a recent joint CEO roundtable, the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) highlighted the pressing need for life insurers to take decisive action to address sustainability challenges in the Total and Permanent Disability (TPD) insurance market.
The discussion revealed a consensus that the challenges facing TPD insurance are significant and likely to persist without proactive measures. Insurers reported deteriorating claims experience across both retail and group TPD markets, driven in particular by the increasing incidence and complexity of mental health-related claims.
These trends are contributing to affordability issues for consumers and increasing financial volatility for insurers. The regulators urged insurers to move on issues they can control, rather than waiting for broader legislative change.
One of the key topics was whether current TPD products still reflect how people work, recover, and manage long-term health conditions. Participants discussed the need for products that better account for recovery pathways, episodic capacity, and evolving patterns of work.
Some insurers are already exploring or piloting new approaches under the current settings, although participants noted that legislative constraints continue to limit the scope for wider product redesign.
APRA and ASIC emphasised that while legislative changes could help, insurers should not delay action in areas within their control. They also stressed the importance of ensuring that products are designed around the needs of their intended target market.
For consumers, particularly those in the 28-60 age bracket with financial dependents, these developments underscore the importance of staying informed about the evolving landscape of TPD insurance. Engaging with independent advisors can provide clarity and help navigate these changes to ensure adequate coverage.
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Knowledgebase
Subrogation: The process by which an insurance company seeks to recover the amount paid to the policyholder from a third party responsible for the loss.
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