Disability Insurance products in Australia provide critical cover for many members of the community who may suffer loss of income because of disability. It is provided both as Individual (or Retail) Disability Insurance (usually distributed by financial advisers) and through Group DII policies (usually as part of superannuation).
The Individual Disability Income Insurance (IDII) product has become more and more complex over time, making it difficult for customers to understand and be satisfied with claims outcomes. At the same time, affordability and accessibility for consumers is declining. As the product has become increasingly cost prohibitive there has been a greater tendency for healthier policyholders to cease their insurance. Over time, the higher claims cost has led to further price increases for the remaining policyholders.
Meanwhile, insurers have been losing very large sums on IDII business, as claims have climbed in frequency and amount. Price increases have not been enough to compensate. Some insurers and reinsurers have effectively withdrawn from the market.
The IDII market is at risk of failure.
In mid-2019 the Actuaries Institute set up the Disability Insurance Taskforce (the Taskforce) to conduct a comprehensive review of issues with IDII. The Taskforce engaged extensively with the many different parties in the IDII ecosystem and, in April and May 2021, released final documents setting out recommendations for change.
In late 2022, the Taskforce widened its focus to next steps in driving change in IDII and also to consider Group DII and Retail TPD/Trauma business.
APRIL - May 2021
Document A-2: IDII - Final Recommendations
This document gives an overview of the feedback received during the consultation period, the Taskforce’s views on that feedback and final Taskforce recommendations, covering multiple parties.
The document will be of interest to anyone involved in the IDII ecosystem – consumer bodies, insurer management and boards, technical and professional specialists, regulators, government and financial advisers.
Fairness in the Life Insurance System - Concept Note can be accessed here.
DOCUMENT B-2: IDII - THE SUSTAINABILITY GUIDE
This is intended to be a guide to good practice in the management of IDII business for insurance company boards and management. It will be of most interest to them, technical specialists and regulators.
These documents have been temporarily withdrawn pending review.
Information Note: Analysing Disability Income Experience and Setting Best Estimate Assumptions can be accessed here
DOCUMENT C-2: THE REFERENCE PRODUCT
The Reference Product is to provide a reference point to aid senior management, the Board and regulators in assessing risk and uncertainty for both customers and insurance companies. In other words, it is intended to assist insurers in the prudential management of their IDII product line. It is not intended to dictate the design of a retail product.
These documents have been temporarily withdrawn pending review.