Australia’s major life insurers have confirmed via the Financial Services Council (FSC) that they will be exiting many of their exiting income protection products as they bring new, more commercially-effective offerings to market next year.
The FSC has signaled the changes with its chief executive, Sally Loane suggesting that the choice for consumers will be to stay put within existing products and face the reality of likely premium increases or switch to what will be new, more affordable offerings.
The FSC sent the market signal at the same time as saying it supported a framework recently put forward by the Australian Prudential Regulation Authority (APRA) and the Actuaries Institute.
The FSC is representative of all the major life insurers in Australia.
Putting forward the FSC’s position, Loane noted that a recent KMPG report on international comparisons of income protection products had suggested that Australia offers the most generous and comprehensive income protection policies of any developed market in the world.
She also noted that this was deemed to have exacerbated the recent increase in the incidence and duration of claims, including for mental health conditions.
“We know there’s a direct link between increasing claims costs and increasing premiums, which is why Australians have seen rising income protection premiums,” Loane said.
“To address this, the life insurance industry is committed to developing new, more affordable types of income protection cover to give Australians more choice.
“For people with existing cover, the choice is likely to come down to either keeping their existing generous type of cover with potentially increasing premiums, if they can afford to, or switching to more affordable income protection cover.”
“APRA has set out its roadmap. The life insurance industry is ready to design a new generation of products,” Loane said.
“We expect the new generation of income protection products to be available in 2021.”
