Report calls for reform in the disability income insurance sector
Having been called upon to assess the disability income in Australia, KPMG has found that simplification of products is central to the future development of the disability income insurance sector.
The Actuaries Institute commissioned KPMG to scrutinise the market, with the aim of initiating a debate across Australia to help promote more consumer-centricity in the sector. The appointment of the Big Four accounting and advisory firm was part of a broader drive from the Actuaries Institute to establish a taskforce to identify areas of potential reform in the disability income insurance sector.
According to the analysis, the disability income insurance sector in Australia is worth $5 billion, and is currently under pressure to better protect customer needs. Reform is being called for across the product design, rating, advice, risk management, governance and regulation spheres, with KPMG’s research reaffirming these factors.
The assessment found that the sector is in need of less complex products and a shift in definitions, as well as change in the benefits methodology, which should be more encouraging to “those who can work towards being healthy.” The authors claim that the currently liberal benefit structure is not sustainable.
Actuaries Institute is a Sydney-based professional body that engages in policy advocacy, with organisations ranging from the government to businesses and the consumer audience as well. Services offered by the organisation include enterprise risk management, prudential regulation, retirement income policy and a number of others.
The organisation has lauded the report as a starting point for discussions around how to improve the disability income insurance sector. “This is a valuable contribution that will help the profession identify and tackle some of the issues that are impacting the market,” said chief executive of the Actuaries Institute Elayne Grace.
Ian Laughlin, convenor of the latest taskforce established by the Actuaries Institute, contextualised the disability income insurance sector and its significance for Australia. “Modern life insurance provides valuable financial benefits for people who can’t earn an income due to injury or sickness,” he said.
“A decline in insurance company profitability despite these steep premium hikes has called into question the sustainability of disability income insurance in its current form, and suggests the potential for market failure. That raises real concerns for consumers, and the broader community, about future access to affordable disability income insurance cover,” he added.
