This development builds on our earlier discussion of the Life Insurance Code review, which highlighted how proposed changes could affect product design, disclosure, claims processes and customer support. The latest industry conversation suggests insurers will face continuing pressure to simplify explanations, reduce friction in administration and show stronger evidence that customers understand what they are buying.
That is positive, but it should not create false comfort. A clearer Code can improve minimum standards, yet it cannot fix a policy that has the wrong owner, an outdated sum insured, an unsuitable benefit type or exclusions that do not match the business risk. Key person cover often sits across revenue protection, debt repayment, shareholder agreements, succession planning and tax treatment. Each of those areas needs deliberate planning, not a once-and-forget approach.
For SMEs, the practical question is whether current cover still reflects the real value of the people the business depends on. A founder who was once mainly operational may now hold lender relationships, investor confidence and strategic knowledge. A senior salesperson may account for a large portion of recurring revenue. A technical specialist may be difficult to replace quickly in a tight labour market. These are not just HR risks; they are balance sheet and cash flow risks.
Business owners should use the Code reform period as a prompt to review three areas:
- whether each insured person is still genuinely critical to revenue, operations or business continuity;
- whether the benefit amount reflects current debt, replacement costs, lost profit and transition time;
- whether policy ownership, beneficiary arrangements and purpose are documented clearly enough for tax, accounting and claims purposes.
It may also be worth taking time to estimate the size of the exposure before comparing cover options or speaking with an adviser. The number does not need to be perfect at the first pass, but it should be grounded in turnover, margins, liabilities and realistic disruption periods.
The message for Australian businesses is straightforward: better industry rules may make life insurance easier to navigate, but they do not replace active risk management. If a key person would be hard to replace tomorrow, the policy protecting that risk deserves attention today.
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