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 - page last updated October 24, 2020
Search promoted life insurances below. Advertiser disclosure.
- Insure Me Now
Life InsuranceInsure Me Now
^See information about the Mozo Experts Choice Life Insurance Awards
Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.
While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.