APRA has acknowledged the challenges arising from an increasing number of TPD claims, noting complexities within the sphere, including those tied to mental health. Accordingly, APRA is engaging with life insurers to identify root causes of these challenges and to monitor the actions being taken to address them. The regulator stresses that the insurance industry must show proactive leadership in ensuring the sustainability of TPD offerings, ultimately leading to improved outcomes for customers.
The regulator emphasises its ongoing oversight of these matters to maintain the sector's prudential soundness and reassure policyholders about the reliability of their insurers when needed. Swiss Re, underlining its commitment to the Australian life market, has opted to halt new business quotes temporarily, intensifying efforts with existing partners to develop sustainable products, focusing particularly on TPD insurance sustainability issues.
This decision underscores the necessity to rethink product designs amidst the backdrop of shifting work environments, rising costs, and evolving societal demands. The conversation around TPD sustainability has gained momentum, with Acenda, another insurer, reporting significant spikes in claims related to mental illness and musculoskeletal conditions over the past five years.
Gerard Kerr, Acenda's chief executive for individual insurance, highlighted that rising TPD claims translate to higher premiums. He urged the industry to explore alternative TPD solutions that cater to changing customer needs, emphasising the correlation between increasing claims and premium hikes, affecting both potential and existing policyholders.
