TPD to be next issue to watch for insurers

Life insurers are keeping an eye on their total and permanent disability (TPD) products to ensure it does not become a sustainability issue like income protection has.

TAL chief executive, Brett Clark, said there were sustainability issues that needed to be addressed in group TPD and that it was the next job for the life insurance industry to look at.

“It’s a similar situation like income protection – we can’t have higher prices, chasing higher claims experience. That's not good for anyone and not good for members of superannuation funds. So, we need to we need to think about this as well,” he said.

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Clark noted TAL would move to address sustainability issues in its TPD products in 2022.

MLC’s general manager for retail distribution, Michael Downey, noted the Australian Prudential Regulation Authority (ARPA) called out that it would look to review TPD.

“I think they're concerned about possible over insurance of TPD and that a lot of mental health claims are being paid out under TPD as well,” Downey said.

“It’s an area for all of us [insurers] to note there and just watch the TPD portfolio that we're all running at the moment and to stay close to that and make sure it doesn't become the next income protection.”

Downey said MLC currently did not have any plans to change its TPD products but were monitoring that area of the business.

He said there could be subtle changes in the future on definition and the maximum amount of coverage.

“Let's see how that there might be some subtle nuances over time or maybe how do we bring TPD and income protection together. Maybe that's how the product start to evolve over the next couple of years,” he said.

“…But it’s not at where income protection was a few years ago and we were slow to react. It’s just on watch at the moment.”

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If mental health claims are a genuine problem, offer a discount for those who take up an exclusion. Could have done the same thing for IP instead of trashing it. Am I missing something?

You are absolutely right George. This is the clear and obvious solution to most of the problems in both IP and TPD. However if the insurers tried to do it, the mental health lobby would oppose it. Just as they oppose any pushback on questionable mental health claims. At the moment the mental health lobby has a very strong position in the media, whereas insurers are quite weak. Therefore the insurers choose not to have the fight, and just pass on the cost of exaggerated and fabricated mental health claims to other policyholders.

Ordinary consumers are the big losers at the end of the day. What a pity there are no genuine consumer associations standing up for their interests.

At one stage MLC ( I think ) had the option to opt out or reduce the claim on mental Heath issues for IP to 2 years creating a sizeable discount
Does anyone do that today ? I cannot think of any ?

OnePath used to offer something similar but they withdrew it.

Ken, I know that CommInsure had a 'premium saver' or some such. It was never talked about and so apparently was never used as it was a shock when it was written. So far has worked out quite well for the insured.

Group TPD, no exclusions, no separation of smokers and non smokers, no loadings, no medicals, yes its a great business plan! Im sure our retail clients will face massive price hikes to pay for this, and all the while tal etc will keep chasing the non underwritten group insurance deals. Dumb and dumber

What's that giant sucking sound? Is it the insurance industry in the bowl?

Insurance company: How else can we wreck this profession, in addition to: raising premiums & responsibility periods, lowering commissions & client entitlements, increasing compliance & costs?

I no longer believe the issues are around a supposed increase in claims. I think the issues are more around insurers like TAL no longer able to avoid paying claims with unmoral claims practices and junk direct products. The other issue I believe is a free fall in new business.
Why are we seeing increases to Life, Trauma and TPD rates? Have death or Trauma claims rates increased? I doubt it, probably the reverse. Why are we seeing discounts offered on new business for these same products if claims are supposedly increasing? Insurers talk about sustainable products and premiums (exec speak for cheaper junk insurance) but what about trying to create a sustainable industry for advisers and customers to be able obtain quality insurance. These are the same execs responsible for implementing a system that made offering risk advice unaffordable and the same execs wondering why new business has plummeted.

Give them time ! They will find a way

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