AIA Australia Highlights Structural Challenges in Life Insurance Industry

Mu noted that economic volatility, regulatory changes, and affordability issues are making it increasingly difficult for insurers to maintain sustainable operations. He pointed out that most households could afford only two mortgage repayments if they lost their income, emphasizing the financial vulnerability of many Australians.

Claims patterns have also shifted significantly over the past decade, with mental health claims doubling since 2014. Mu revealed that around 70% of AIA Australia's claims this year have come from white-collar workers, attributing this trend to factors such as the COVID-19 pandemic, hybrid work environments, and digital disruption.

To address these challenges, AIA Australia is focusing on sustainable pricing and severity-based product design, moving away from comprehensive, high-cost Total and Permanent Disability (TPD) cover. The company's TPD Assist model, which supports clients' gradual return to work, has delivered strong outcomes and will inform future product refinements.

Mu urged advisers to reassess product selection through a long-term affordability lens, emphasizing that while comprehensive cover might seem attractive upfront, sustainability matters more to clients who need to maintain protection over time. He also called for industry, regulators, and advisers to collaborate in modernizing best-interest duties and supporting the transition to more sustainable life insurance structures.