Regulators and Insurers Collaborate to Enhance TPD Insurance Sustainability

During the meeting, there was broad consensus that the challenges confronting TPD insurance are significant and likely to persist without proactive measures. Participants noted a deterioration in claims experience across both retail and group TPD markets, driven particularly by the increasing incidence and complexity of mental health-related claims.

The discussion emphasised the need for product redesign to better reflect recovery pathways, episodic work capacity, and evolving patterns of work. While insurers acknowledged legislative constraints limiting substantial redesign, APRA stressed that insurers should not delay taking actions within their control to improve product sustainability.

In the retail market, the conversation highlighted growing industry momentum towards new TPD product structures. However, participants acknowledged that advisers continue to favour legacy offerings, raising questions about whether existing products are appropriately priced for evolving claims experience and emerging risk trends.

In the group insurance market, participants highlighted the key role played by superannuation trustees in driving member outcomes. Insurers noted that worsening claims trends are often managed through premium increases and reduced cover, rather than more fundamental redesign of benefits and policy structures.

APRA and ASIC encouraged insurers to maintain proactive and constructive engagement with trustees and indicated they were open to facilitating joint insurer-trustee efforts aimed at improving outcomes for members.

This collaborative approach aims to address the sustainability pressures in the TPD insurance market, ensuring that products remain viable and continue to meet the needs of Australian consumers.