While it received little media attention at the time, Australian Prudential Regulatory Authority’s report into income protection schemes and life insurance schemes and provided a positive view of programmes to the end of 2019.
APRA provides a report into death, TPD, trauma, income protection, consumer credit, funeral and accident insurance across individual, group superannuation and other group distribution channels quarterly.
The report showed marked improvements and indicated that with the correct income protection for users, it was good value for money. Improvements included “claims acceptance rates rising to historical levels, falling claims time frames and high loss/claims ratios, particularly in group insurance in superannuation,” according to Investment Magazine.
Both time frames and acceptance rates for TPD claims have improved, with “85 per cent of finalised TPD claims sold through an advisor were admitted. The figures for finalised income protection claims were 95 per cent and 97 per cent respectively. Only 5-6 per cent of claims were withdrawn.”
Claim time frames for acceptance dropped from 5.7 months and currently sits at 1.7 months for income protection claims, while dispute claim processing time frames have also improved.
Generally, the report provides good news for consumers with income protection insurance – it is good value for money when placed correctly. However, many analysts urged caution in celebrating the improvements: the claims paid ratio for some insurers was over 100 per cent, indicating that the schemes may not be sustainable.
According to Investment Magazine, “further new APRA data shows that income protection products are running at substantial losses, which is not sustainable if they continue.”
Despite this, against rising reports of bad news throughout the financial services industry, the report provides positive reviews of income protection products and that they are offering significant consumer benefits.