The Australian Prudential Regulation Authority (APRA) has decided to suspend individual disability income insurance (IDII) measures for at least two years following consultation with the Australian Securities and Investments Commission (ASIC).
Writing to life insurers and friendly societies, APRA said it expected them to demonstrably strengthen customer engagement while the suspension was in in place.
“This includes collecting information on changes to policyholder’s circumstances, including occupational and financial circumstances and dangerous pastimes, to enhance the ability of life companies to understand and manage the risks of their portfolios,” APRA said.
During the period of suspension, APRA also expected life companies to:
- Maintain a strong focus on IDII sustainability, including the uplift of capabilities and practices in accordance with APRA’s previously communicated expectations;
- Consider conduct-related matters arising from various law reforms alongside APRA’s sustainability measures, as previously communicated by ASIC. These reforms included the design and distribution obligations, unfair contract terms, claims handling and duty of reasonable care;
- Take steps to support policyholders in unsustainable IDII products transitioning to newer, more sustainable products, where appropriate;
- Actively contribute to related Treasury reviews, with a specific focus on both the sustainability of products and distribution and appropriate outcomes for policyholders;
- Seek to identify possible alternative ways to effectively address the risk of price being the only lever to deal with contract terms that are not sustainable; and
- Strengthen their engagement with other industry stakeholders, particularly financial adviser bodies, in support of developing more robust solutions.