Disability Income Insurance has been the biggest drag on the balance sheets of Australia’s major life insurance companies and the Actuaries Institute is now supporting the Australian Prudential Regulation Authority (APRA) maintaining its intervention in the area.
Releasing the findings of the Actuaries Institute Disability Insurance Taskforce, the institute has backed the continued regulatory intervention “until such time as the industry demonstrates a sustained improvement in practices and outcomes”.
However, among the recommendations of the taskforce is the use of a reference product by insurers to aid in “balancing innovation and clarity with respect to definitions” and a deferral of the proposed standardisation of insurance policy definitions for at least two years to allow a review of those definitions.
The report also argues that the Australian Securities and Investments Commission (ASIC) should produce examples of application of best interests duty (BID), “including the trade-off of features and price, for IDII (and other life insurance) and include this in RG 175”.
“This should include consideration of customers moving from legacy to new IDII products. Pending ASIC provision of examples in RG 175, the Actuaries Institute, Financial Services Council (FSC) and the Financial Planning Association (FPA)/ Association of Financial Advisers (AFA) should produce examples of application of BID for IDII (and other life insurance),” it said.
The chair of the Actuaries Institute Taskforce, former APRA deputy chair, Ian Laughlin stated simply that the disability income insurance ecosystem was not healthy.
Indeed, the introduction to the final report of the Taskforce suggested that without intervention the market was at risk of failure.
Where financial advice is concerned, the report recommends key amendments to the products ratings process with ratings houses working with licensees to ensure the products achieve what they are meant to achieve in the long-term interests of the customers.