TPD policies are no longer meeting the realities of modern claims experience according to APRA’s Jane Magill.
Speaking at the All Actuaries Summit 2026, Magill – the regulator’s Executive Director, Life, Private Health Insurance and Superannuation – warned that rising mental health claims were placing significant pressure on the sustainability of TPD cover and forcing the industry to rethink long-standing product settings.
“TPD is now being asked to solve an issue it was never built to address,” Magill said, pointing to data showing mental health claims now account for one in three TPD claims paid.
Citing CALI data, she said claims relating to mental health among Australians in their 30s had increased by more than 700% over the past decade.
…Our environment is changing rapidly – socially, medically and economically…
Magill said the increase was more than a simple rise in claim volumes and represented a deeper structural challenge for insurers.
“Our environment is changing rapidly – socially, medically and economically – and it is testing the limits of insurability,” she said.
She argued that current TPD product structures, including lump-sum benefit designs, often failed to deliver appropriate outcomes for claimants with episodic or fluctuating conditions, particularly those involving mental illness.
Speaking on product sustainability, Magill said the CEOs of insurance firms had raised concerns the traditional TPD framework was no longer suited to today’s dominant claim drivers.
She said there was a “strong case” for earlier intervention models that provide support sooner in a claimant’s disability journey to improve long-term outcomes.
Magill acknowledged there were significant constraints on redesigning TPD products, including legislative settings beyond the prudential regulator’s control, but said sustainable reform would also depend on support from advisers and other distribution stakeholders.
…In retail, advisers and research houses also have significant influence…
“In retail, advisers and research houses also have significant influence, and existing products can often be favoured over newer, more sustainable designs,” she said.
Magill highlighted growing regulatory focus on the issue, with APRA having conducted a thematic review of insurance risk management practices and, together with ASIC, convening a CEO roundtable with insurers. See: TPD Sustainability Pressures Topic of Industry Debate
Key points
- TPD is being asked to solve an issue it was never built to address
- The current form of TPD insurance is being tested by a sharp rise in mental health claims
- The solution will not come from waiting for perfect conditions or pulling one lever
Claims management
Magill identified claims management capability as one of the key areas requiring improvement, saying insurers needed better-resourced claims functions with stronger expertise to manage increasingly complex claims.
“We are also seeing the need for new approaches in assessing more complex claims to ensure that assessments remain appropriate and valid claims are paid,” she said.
She told actuaries they had a critical role in identifying emerging pressure points before they became visible in reported results, particularly through pricing, reserving, and product design disciplines.
Despite growing concerns over sustainability, Magill said APRA did not intend to intervene through measures such as mandated product definitions or capital changes.
…The question now is whether the industry can act swiftly …
Instead, she said APRA would continue supporting industry-led reform through thematic reviews, facilitating engagement between insurers and superannuation trustees, and participating in discussions with government on legislative barriers affecting product sustainability.
No consensus
Magill said there was no industry consensus on what a sustainable TPD product should look like, although APRA was seeing insurers using data and forward-looking modelling to demonstrate the risks of maintaining current settings.
“The question now is whether the industry can act swiftly and reset before sustainability erodes further,” she said.
She also warned that failure to adapt could undermine trust in protection products and threaten their long-term availability and affordability.
