Sickness and Accident Insurance -Steve Marsten
We have always banged on about the importance of Sickness & Accident Insurance and the importance of protecting one of your most important assets – your salary. Unfortunately, there have been some changes which I feel are somewhat concerning. The Australian Prudential Regulation Authority (APRA), the regulator for life insurers in Australia, announced in early December that they had launched an intervention into the insurance market in response to substantial ongoing losses on income protection insurance. APRA proposed various measures requiring insurers to address policy design and pricing to improve the sustainability of the income protection market.
If the Insurance world implements these changes, these will be some of the most significant changes to the personal insurance industry to date. The changes should not impact current income protection policyholders but will be relevant for all new policies, or those who wish to increase their levels of cover.
APRA expects insurers will cease to offer certain product features in the future including “excessively generous features and terms that, in some cases, provide a financial disincentive for policyholders to return to work”. address this.
It’s understood that APRA would like from 31 March 2020, to see Agreed Value income protection policies cease to be available for new policies. Agreed Value refers to the locking in of the monthly insurance benefit (similar to car insurance agreed value), without needing to prove what you were earning at the time of claiming. This is particularly relevant for self-employed persons where annual income may fluctuate and Agreed Value policies would offer greater security.
It’s expected that by July 2021, insurers will no longer offer some other benefits, with the two biggest changes being:
Policies will no longer be “guaranteed renewable”. As a result, every five years the insurer can revise the terms and conditions of a policy and re-assess the insured’s income and occupation position.
Policies with long term benefit periods (typically “to age 65”) should have controls in place to limit the ongoing claim, such as having a stricter disability definition for longer benefit periods. This means that:
Currently, there is one ‘tier’ of definitions you must meet to claim on an income protection policy and remain on claim if you are unable to perform your normal job.
Overall it will make policies less attractive to younger applicants and more flexible and controllable by the insurer. If you have any further queries regarding this issue feel free to call the team at UHY Haines Norton on 07 49721300.