The Financial Planning Association of Australia (FPA) and the Association of Financial Advisers (AFA) have welcomed news from APRA that the proposed policy contract duration measure for individual disability insurance ( IDII) will be suspended for at least two years.
FPA CEO Sarah Abood and AFA CEO Phil Anderson said the prudential regulator’s decision is a win for consumers because it will protect them from “unintended negative consequences”.
“The measure was part of a planned package focused on improving the sustainability of the IDII market. The arrangement would have seen new income insurance contracts from October 2022 capped at a maximum term of five years, rather than being guaranteed renewable – usually until the policyholder’s retirement age. – as is currently the case,” Ms Abood and Mr Anderson said in a joint statement.
“While policyholders would have had the option of reapplying for cover, the risk is that the new contract terms have changed and policyholders will be underwritten again based on a possible change in income, occupation and password. -time.”
Had the measure been implemented, Ms Abood and Mr Anderson argued that it could have caused a number of problems for consumers, including missing communications from their insurer and uncertainty for those who might the subject of a complaint at the end of the five-year period.
“A number of other IDII measures have already been implemented and should have a positive impact on the viability of these products, including changes to ensure that benefits are now based on income at the time of claim. We believe that more time is needed to assess the impact of these changes on the overall sustainability of the market,” the statement continued.
“We look forward to continuing to engage with regulators and insurers to ensure consumers have access to high-quality, reasonably priced insurance that protects them and their families when needed.”
Neil is the Associate Editor for Wealth Headlines including ifa and InvestorDaily.
Neil is also the host of the ifa show podcast.