TPD Sustainability Pressures Topic of Industry Debate

Australia’s financial regulators have warned life insurers they must take more decisive action to address mounting sustainability pressures in the TPD insurance market, following a high-level industry round table debate.

Hosted by APRA and ASIC, the event brought together senior executives from 19 insurers and reinsurers, alongside representatives from Treasury and CALI.

According to a report published by the regulators, there was “broad consensus” among attendees that the challenges facing TPD insurance are “significant and likely to persist” unless changes are made.

Participants said deteriorating claims experience across both retail and group TPD markets –  “driven in particular by the increasing incidence and complexity of mental health related claims” – was contributing to affordability pressures for consumers and increasing financial volatility for insurers.

Much of the discussion centred on product redesign, with participants examining whether traditional TPD definitions and benefit structures remain suitable in an evolving workforce environment.

…insurers should not delay taking actions in areas that are within their controls…

Participants examined what future products could look like, including designs that better reflect recovery pathways, episodic work capacity, and evolving patterns of work.

While insurers argued legislative constraints limited the scope for more substantial redesign, APRA stressed insurers “…should not delay taking actions in areas that are within their control”.

Discussion on the retail market highlighted growing industry momentum towards new TPD product structures, although participants acknowledged advisers continued to favour legacy offerings.

Existing TPD products

Questions were also raised around whether existing retail TPD products are appropriately priced for evolving claims experience and emerging risk trends.

In the group insurance market, participants highlighted the key role played by superannuation trustees in driving member outcomes. Insurers noted worsening claims trends are often managed through premium increases and reduced cover, rather than more fundamental redesign of benefits and policy structures.

APRA and ASIC encouraged insurers to maintain “proactive and constructive engagement” with trustees and indicated they were open to facilitating joint insurer-trustee efforts aimed at improving outcomes for members.

The debate was held on 15 April, with details just published.

Life insurance executives taking part in the debate were…