AIA Australia appears to be the first cab off the rank in launching the next generation of income protection products into the Australian market.
Responding to APRA’s intervention into income protection insurance products at the end of last year (see: APRA Sets New Course for IP Sustainability), the insurer is set to launch a simplified, complementary IP solution called Income Protection CORE.
According to an initial positioning guide for advisers released by AIA, Income Protection CORE “…is about getting back to basics and focusing on what Income Protection cover was designed to do”.
The fundamentals remain the same, in that the indemnity-style product will deliver a monthly replacement income where the benefit is based on the insured’s current income, should they become totally or partially disabled and unable to work.
The new product is to be offered along-side AIA’s existing and more extensive Income Protection product and is intended for those consumers for whom a more scaled down ‘back-to-basics’ solution reflects a better fit for their circumstances.
A selection of key differences between AIA Income Protection and AIA Income Protection CORE include:
Income replacement ratios
The new product will offer up to 70 per cent of pre-disability income for 24 months of benefit period, reducing to 60 per cent for the remainder of benefit period. This compares to up to 75 per cent of pre-disability income under the existing product.
Definition of disability
A tighter definition of disability will apply under Income Protection CORE:
“Unable to perform the Material and Substantial Duties of your Own Occupation for initial 24-month Benefit Period and a Suited Occupation thereafter.”
The definition of disability under the current offer is:
“Unable to perform one or more essential income producing duties of the usual occupation for more than 10 hours p/w. Total Disablement – Multi Definition also available under Extended Indemnity”
Income definition
The Income Protection CORE offer excludes employer superannuation contributions for employees, whereas the existing income definition can include superannuation contributions for employees.
Other feature and benefit differences under Income Protection CORE include:
- Tighter policy terms and expiry dates
- Reduced number of waiting period options
- Significantly reduced benefit period options – 5 years and to age 65 only
- More restricted definition of partial disability
- Broader list of benefit offsets
- No additional optional benefits
In noting that its Income Protection CORE offer is designed to address the chronic and ongoing industry issues of affordability and sustainability, AIA notes this new offer is “…aligned to APRA’s guidelines”. It adds the benefits to advisers and their clients can include:
- Addressing long-term affordability concerns
- Increasing retention
- Minimising premium rates
- Initiating a stepping stone insurance strategy
Riskinfo understands Income Protection CORE will be launched into the market in two stages early in the New Year, with an initial launch set for next month, followed by an updated version the insurer is looking to release sometime in March 2021.
“Launching in January will enable AIA to help support advisers and industry to transition and adjust. Given the significance of the change it will ensure that when the industry switches over, advisers and insurers are ready,” stated AIA’s CEO Australia and New Zealand, Damien Mu.
Advisers can click here for more details on AIA Income Protection CORE.
The introduction of Income Protection CORE follows the recent release by AIA of its new Crisis Extension trauma insurance solution (see: AIA Australia Launches New Trauma Product Option).