APRA and ASIC Advocate for TPD Insurance Reforms

During the roundtable, there was broad consensus that the challenges facing TPD insurance are significant and likely to persist unless substantial changes are implemented. Participants noted that deteriorating claims experience across both retail and group TPD markets—particularly due to the increasing incidence and complexity of mental health-related claims—is contributing to affordability pressures for consumers and financial volatility for insurers.

A key focus of the discussion was on product redesign. Attendees examined whether traditional TPD definitions and benefit structures remain suitable in an evolving workforce environment. Future product designs were considered, including those that better reflect recovery pathways, episodic work capacity, and changing work patterns.

While insurers cited legislative constraints as limiting the scope for substantial redesign, APRA emphasized that insurers should not delay taking actions in areas within their control. The discussion also highlighted growing industry momentum towards new TPD product structures, although participants acknowledged that advisers continue to favor legacy offerings.

Questions were raised about whether existing retail TPD products are appropriately priced given evolving claims experience and emerging risk trends. In the group insurance market, participants noted that worsening claims trends are often managed through premium increases and reduced cover, rather than more fundamental redesigns of benefits and policy structures.

This call to action from APRA and ASIC underscores the urgent need for the life insurance industry to innovate and adapt TPD insurance products to ensure their long-term sustainability and affordability for Australian consumers.