APRA and ASIC Advocate for Urgent TPD Insurance Reforms

Participants acknowledged that the challenges facing TPD insurance are significant and likely to persist without substantial changes. A key concern is the deteriorating claims experience across both retail and group TPD markets, primarily driven by an increase in mental health-related claims. This trend has led to affordability pressures for consumers and financial volatility for insurers.

The debate focused on the need for product redesign to better align with the evolving workforce environment. Traditional TPD definitions and benefit structures may no longer be suitable, prompting discussions on future product designs that reflect recovery pathways, episodic work capacity, and changing work patterns.

While insurers cited legislative constraints as a barrier to substantial redesign, APRA emphasized that insurers should not delay taking actions within their control. The regulators encouraged proactive engagement with superannuation trustees to improve member outcomes and indicated openness to facilitating joint efforts aimed at enhancing the sustainability of TPD insurance.

This call to action underscores the critical need for the life insurance industry to adapt to emerging challenges, particularly the rising incidence of mental health claims, to ensure the long-term viability of TPD insurance products.