AIA Australia has released an update to its flagship Priority Protection range, effective 12th June 2022, in which many of the key changes relate to the insurer’s Income Protection CORE product offer. The key changes within IP Core include:
Increase in First Income Tier
- Amendment to income tiering information to reflect increase in the initial income tier from $200,000 to $240,000.
Amendment of Offset wording
- Income offset now applies to any payments received from other income protection type policies irrespective of whether they were disclosed at time of application. Other Income Protection type policies include Individual or Group Income Replacement policies, salary continuance or mortgage repayment cover.
- Under the previous definition, offsets were applied to any payments received from another insurance policy, or from a superannuation/pension plan that was not disclosed at initial or increase application.
Simplified wording
- Definitions for Total Disability (not actively employed), Partial Disability (not actively employed) and Total Disability for Income Protection Core have been simplified.
Partial Disability Definition
- Reference to “Material and Substantial Duties” removed and replaced with “Reduced Capacity” wording. Reduced capacity means “less than your capability (having regard to your injury or sickness)”.
- Previous wording: “In the first 24 months of your Benefit Period that, you are: solely due to Injury or Sickness, unable to perform some of the Material and Substantial Duties of your Own Occupation (Income Protection CORE)”
- New wording: In the first 24 months of your Benefit Period that you are working, or capable of working, (whether paid or unpaid) and, solely as a result of Injury or Sickness: only capable of working in your Own Occupation (Income Protection CORE) in a reduced capacity
- There has also been a minor restructure in this section of the new to reflect separate terms for 5-year benefit periods.
Change to Waiting Period
- Minor wording change to clarify intent around when the waiting period commences.
Change to General Terms and Conditions
- Removal of content regarding lost or destroyed policy documentation.
Click here to access more details on these and other changes that have been outlined in a 20-page “Summary of Changes – for Advisers” document provided by AIA Australia.
…And click here or on the image below to access AIA Australia’s updated 12th June 2022 Priority Protection PDS.
Advisers can also visit the AIA Australia website for more information by clicking here.
(AIA Australia has prepared a Target Market Determination which describes the class of consumers that comprise the target market for this product. The Target Market Determination can be sourced here)
Yet another insurer updating its original 2021 offering. Some insurers have done three updates. And, if the truth be told, there is absolutely no significant claims experience on which to form an opinion on these Apra inspired IP policies. So it’s reasonable to deduce that the inspiration for continually updating the original gold-plated offer is that insurers are watching market share reduce and in desperation are responding by attempting to tart up up the first offering to generate for more regular sales from the 2021 IP contracts.
I was ridiculed at the time on some forums because I declared that this would be a moving feast for at least three years – no insurer could afford to sit on their 2021 IP offering and still seek market share by hoping specialist risk advisers would be recommending these new style products to replace older more generous products, purely on the basis of a so-called cheaper premium. Not with the sword of Damocles, aka the FASEA Code of Practice, hanging over their heads..
This whole exercise has been a total fiasco. An Apra-inspired disaster which never involved consulting the people who are the real stakeholders – specialist risk advisers. Now, everyone is congratulating themselves that Apra appears to have deferred the five year contract disaster they were contemplating introducing this year, but there are still serious contractual issues which prevent specialist risk advisers from recommending to clients that they replace their old pre-2021 contracts with a bright new shiny vehicle which may, or may not, be provided with four wheels.
Yes we can blame Apra and its lack of knowledge of what really goes on in the industry away from the actuarial tables, but in my view the bottom line here rests with the CEOs of the life insurers who, in 2020, did not have the kahunas is to challenge the volcanic ideology coming out from the heavy hitters in Apra at the time e.g. no more cross subsidisation between insurance lines. Apra played the Putin strategy, by hinting that more capital would be required for those insurers who retained all, or parts of, their pre-2021 IP policies. You could hear the knees rattling in the CEOs office from 100 miles away.
As they used to say in the Marx Brothers movies,” it ain’t over till the fat lady sings”. From where I sit, the opera overture hasn’t even started-the orchestra is still tuning up!
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