The Total and Permanent Disability product sold in Australia has some quite significant sustainability issues that require urgent attention from the industry, according to a senior Australian executive at Swiss Re.
Kresh Wright, Swiss Re’s Head of Life and Health, Australia and New Zealand, told Riskinfo the insurance industry needs to “…confront some of these TPD challenges head-on so that we can ensure the sustainability of this product, which is crucial as a risk management tool for consumers.”
She notes the key issue in terms of the sustainability of the product is that it needs to better support the working population and deliver more effectively when a customer suffers a severe health incident.
Wright, who leads a multi-functional team to deliver reinsurance solutions for Swiss Re, explains that TPD was designed many years ago when the workplace was very different. The product was then focused on supporting individuals who were unable to continue to work because they had an accident in the workplace that resulted in a physical injury.
However, she says, today the environment we work in and the occupational risks can be quite different. In turn, medical technology, medical advancements and access to healthcare are also very different from when the product was developed.
…this idea of permanent and permanence doesn’t exist in the same way as it did many years ago
She says Swiss Re believes that this idea of permanent and permanence doesn’t exist in the same way as it did many years ago when TPD was first designed.
“That’s why we believe TPD sustainability needs to be addressed and if we can look at the product as an industry and redesign it …it would better meet the needs of customers today.”
Wright says TPD should be dependent on the disability the customer is actually experiencing but also be a product that can support customers through that disability.
She says that could be through early intervention, medical support or setting in place a path to help claimants back to work, if that’s appropriate for them.
“But ultimately, for me it’s about a product that is simple, relevant to customers, that is fit- for-purpose, is affordable and continues to be all of those things going forward.”
…one of the key areas to consider is severity-based products
She says one of the key areas to consider is severity-based products, noting that with the different access to healthcare, what might have been a permanent disability many years ago may actually be treatable today.
Wright says that mental ill health has become far more prevalent over recent years and common mental health conditions attract less stigma and encouragingly more people are seeking help. She says placing a label of ‘totally and permanently disabled’ on someone with a mental health condition can be damaging and is part of the reason why this product may no longer be fit for purpose.
…it’s important we have a product that allows us to support someone back to good health rather than a product that is focused on proving permanent disability…
“And with such different illnesses now for us to deal with, I think it’s important we have a product that allows us to support someone back to good health rather than a product that is focused on proving permanent disability.”
She notes that “…almost pushing someone towards demonstrating they are permanently disabled” means it is difficult to then get them out of that mindset and get them back to the best outcome for them in the longer term, adding that being in work plays a big role in people’s general health and wellbeing.
Wright believes there is broad market acknowledgement in the insurance industry that something needs to be done on TPD, particularly as the industry comes out of the phase of reviewing IDII.
“I get the strong sense the industry is turning to the TPD product now. I’ve had conversations with an industry body and know that sustainability is high on the radar, so I’m hoping that this is the start of a groundswell in terms of industry movement towards sustainability for TPD,” she states.
Kresh, you apply your passion to changing or abolishing the ludicrous Corps Act and the even more ludicrous Adviser Standards in this country and you have my vote. Your problem is, under the current laws, I wouldn’t sell the product to which you’re referring as it requires to gaze into a crystal ball, and that would be feeding the lawyers. Advisers selling Risk need more protection from retrospective action. We all know people don’t want to spend money on insurance and is mostly seen as a waist but do like the peace of mind it provides, however memories turn very foggy at claim time especially when products don’t pay or worse when they do but it’s no where near enough money. Big problems require even bigger solutions. One day (very soon I hope) the government will wake up.
Obviously now that IP policies have been designed to prevent successful long term claims & increase insurer profits, the next agenda seems to be diluting TPD policies.
In an attempt to avoid admitting the inferior quality of the new IP policies Insurers have been trying promote TPD to fill the void and now reinsures want to water down TPD policies too?
From a clients perspective, the concept of a severity based policy is anything but simple, so this would appear to be spin to justify applying restrictions on policies in order to increase profits.
At some point they will reduce the policies to such a degree that the value is just not there and we can no longer justify the policies.
BKY is spot on- both the Corps Act AND the FASEA Code of Practice needs serious revision if risk advisers are not to be hung on the clothesline and left to dry by allowing reinsurer’s to add that wonderful insurance word “SEVERITY”.
Apparently our friends over at Apra not only failed to consult with insurers on the 2021 IP changes, but also failed to consult with reinsurer’s. It’s obvious to me that reinsurer’s are very concerned that risk Specialist advisers are looking to TPD benefits to supplement the total inadequacy of the new IP contracts, driven, of course, by the best interests requirement and FASEA.
I’ve noticed an increased “curiosity” from underwriters as to the need for larger sums of TPD coverage, particularly if it’s a single professional person that has yet to acquire significant debt. Reinsurers apparently are not interested in allowing clients to purchase TPD, for example, to fund long-term care IN THE HOME, which is a preferable option for those younger lives who think about it for longer than five minutes.
Apra appears to be staffed by a whole raft of professional technicians, none of whom care to, or are paid to, sit back, contemplate as advisers are required by the FASEA code, and asked themselves “WHAT IF”
it would appear that the reinsurers are seeking to load TPD contracts with so much discretion in the favour of the insurer that the TPD product essentially is no longer fit for purpose, and most certainly can’t be used as a backup to inadequate IP protection.
Great points by Old Risky.
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