Following the announcement that the United Kingdom is to introduce standard TPD definitions next year, we ask whether this could be the fore-runner of change in the Australian life insurance market.
Our latest poll questions asks:
Do you agree that standard TPD definitions would benefit the consumer in the Australian life insurance market?
There are clear arguments both for and against this position. In the UK (see: Standard TPD Definition to be Released in UK) it was decided, after broad consultation with advisers, consumers and other industry stakeholders, that a standard set of TPD definitions, more ‘descriptive’ headings and better consumer education will lead to:
- Greater clarity in the mind of the consumer
- Less TPD claims being denied
On the other hand, whenever the case for standardising definitions is raised (TPD or other key critical illness definitions), there is a counter argument that standardising definitions will stifle any product innovation and lead to a straight-out price war.
For this question, it may be difficult to develop an informed position on the principle alone. Rather, it may require all interested stakeholders to consider the finer details of the proposition. In the UK, the Association of British Insurers will release its standard TPD definitions early in 2011 when it updates its Statement of Best Practice for Critical Illness. We will report these details when released.
There are also differences that exist between the UK and Australian retail insurance markets. For example, most TPD definitions that exist in the Australian market already possess many common key phrases to the extent that a significant proportion of advisers, researchers and life company execs believe the differences between the large majority of TPD definitions lie mostly at the ‘edges’.
The focus during 2010 in Australia has naturally centred on the implications of the Future of Financial Advice reform proposals, both to the industry and to consumers. While this focus will continue into 2011, it is important to take a step back to also consider questions such as the future direction of insurance products themselves.
Let us know what you think. Do you believe standardised TPD definitions will be of benefit to the Australian life insurance consumer? …
The major problem is the restrictive definition available through superannuation, which is ‘Unfit for any occupation’ vs. the Own Occupation definition available outside superannuation. Unless this can be resolved there may be serious issues between super and non-sup TPD with a one size fits all definition. The UK probably does not have this problem.
John Keen
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