Disability insurance needs to be “simpler and cheaper” for all Australians, with a focus on return to health and work, a taskforce has found.
Without an overhaul, those who need cover may not be able to afford it in the future and life insurance companies selling individual disability income insurance policies will continue to suffer large losses, Actuaries Institute taskforce convener Ian Laughlin has said.
He explained that “this is neither in the interests of customers nor the community at large”.
The sector must offer products that provide more certain outcomes, are more easily understood by consumers and offer features and prices that better meet their needs, Mr Laughlin added.
The taskforce has released a report – the Disability Insurance Income Provisional Findings and Recommendations – that states disability insurance products have become more and more complex over time, meaning it is now difficult for customers to understand and be satisfied with claims outcomes.
It also said affordability and accessibility for those who do need cover is declining: “Increasingly, those with cover are finding the cost prohibitive, and the more healthy policyholders are then likely to not maintain cover.”
The taskforce considers individual disability income insurance policies as providing critical cover for those who may lose their income because of disability.
“About 850,000 policies are currently on issue, which is an indicator of the importance of the market,” the Actuaries Institute has noted.
According to institute president Hoa Bui, without the reform proposed by the taskforce, the lack of sustainability is “one of the most pressing issues for life insurers today”.
The recommendations come after the release of a KPMG paper originally commissioned by the Actuaries Institute that found life insurance companies had lost $3.4 billion over a five-year period by selling complex products to consumers.
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