APRA resumes overhaul of income protection insurance

The Australian Prudential Regulation Authority (APRA) has announced it will recommence reforms of individual disability income insurance (IDII).
The intervention into IDII, otherwise known as income protection insurance, began in December 2019 but was put on hold in response to the global pandemic.
Why is APRA intervening in the income protection insurance market?
APRA’s aim is to ensure the long-term viability of this kind of insurance, which has seen the industry lose more than $3.4 billion over the past five years.
In the 2019 announcement, APRA executive board member Geoff Summerhayes said a drive for market share had driven down the price of premiums on income protection insurance policies with “excessively generous features and terms.”
In some cases, he said these financial circumstances disincentivised policyholders to return to work.
"Insurers know what the problems are but the fear of first-mover disadvantage has proven to be an insurmountable barrier to them making the necessary changes,” Summerhayes said.
“By introducing this package of measures, APRA is forcing the industry to better manage the risks associated with IDII and to address unsustainable product design features – or face additional financial penalties."
How will this change income protection insurance?
In the recent announcement of the framework’s 1 October commencement date, Summerhayes said “decisive action can no longer be delayed”, with COVID-19 expected to exacerbate IDII issues.
The intervention measures require providers to alter their products in line with APRA’s recommendations. This includes changes like:
- Ensuring IDII benefits do not exceed the policyholder’s income at the time of claim
- Stopping all sales of agreed value policies (which don’t require ongoing income assessment)
- Avoiding offering policies with fixed terms and conditions of more than five years.
If you currently hold a life insurance policy which includes income protection, get in touch with your provider to see how this might impact you. If you think you might need life insurance, explore the options below.
Compare life insurance policies
- Loading SVG...
Life Insurance
7 year winner of Australia's Best Life Insurer Award*! NobleOak Life Insurance provides affordable protection from life’s low blows. If you were to pass away or become terminally ill, it can help support your family to clear debts such as mortgage payments and assist with living expenses.
- Loading SVG...
Premium Life Direct Income Protection Insurance
Income Protection – Mozo 2025 Exceptional Value Income Protection winner* NobleOak’s Income Protection Insurance provides a reliable safety net to help protect one of your most important assets – your ability to earn an income – if the unexpected occurs and you suffer an injury or illness which prevents you from working.
* Terms, conditions, exclusions, limits and sub-limits may apply to any of the insurance products shown on the Mozo website. These terms, conditions, exclusions, limits and sub-limits could affect the level of benefits and cover available under any of the insurance products shown on the Mozo website. Please refer to the relevant Product Disclosure Statement and the Target Market Determination on the provider's website for further information before making any decisions about an insurance product.
^See information about the Mozo Experts Choice Life Insurance Awards