In Australia, APRA says it is yet to announce its final decision as to whether it will proceed with the requirement for a five-year renewal of contract term under individual disability income insurance (IDII) policies.
Responding to a question from Senator Ben Small at a Senate Economics Committee hearing last week, APRA Deputy Chair, Helen Rowell, said the authority was aiming to communicate its decision on whether it would proceed with the five year renewal term before the end of March.
Senator Small noted the final tranche of APRA’s new IDII requirements was scheduled to start on 1 October 2022 and that it requires life insurance underwriters to provide contract renewal every five years, subject to policy terms and conditions that apply at that time (see: IP Policy Contract Terms – APRA Gives Insurers Another Year).
He asked what disadvantages, if any, this could result in for consumers, particularly considering issues such as reduced terms, increased costs or, in extreme cases, the total loss of cover.
Rowell told the committee APRA was aware of the implications and the pros and cons of moving to the five-year policy contract term.
She said there were issues regarding certainty and stability for policy holders as well as insurers, which needed to be balanced against other issues the Senator referred to, such as continued access to cover and the need to re-underwrite.
Rowell said these were complex considerations to balance. When it introduced the IDII measures she noted APRA felt there was a need to make significant changes in the IDII market to address the underlying losses and poor outcomes for policy holders that were occurring.
“The five-year contract term was one of a set of measures. It is the only one that remains to be put in place and we did defer it because of the feedback we had from industry about some of the challenges and complexities.”
Rowell added that APRA has had further engagement through the FSC and with individual insurers over the last couple of months “… and we are still discussing with them those challenges and the pros and cons of that measure.”
APRA will need to communicate its response to industry as to proceeding or otherwise with the particular provision in the coming months
She told the committee APRA will need to communicate its response to industry as to proceeding or otherwise with the particular provision in the coming months.”
Asked about a firm timeline on that communication, Rowell said they don’t have one “…but we are aware of the importance and the urgency. It is actively under discussion and consideration within APRA.”
While there were no guarantees, she said APRA hoped to communicate by the end of March.
“That is the goal to we are working towards – to make a decision by the end of March as whether we are proceeding with this requirement or not,” she said.