Almost two-thirds of people in Australia who received a lump-sum TPD payment – that was designed to support them for life – spent it within three years. The finding was highlighted by Acenda’s Partner Education Manager Marshall Ross during a company webinar held across the ditch.
“When it came to what they actually received as a lump sum, 63% of them exhausted their benefit within three years,” he said.
“So they had this benefit that was designed to compensate them for the loss of never earning an income again, and they’d used it in only three years.”
Ross said about half of those holding a TPD product would have preferred an alternative to a single lump sum: “…something that was more episodic, or that was an income stream, was desirable compared to just a single lump sum payment”.
Rising claims
Turning to claims, he said TPD claim volumes and sums insured in Australia rose between 2018 and 2024.
“On average, payouts ranged from about A$600,000 to just under a million [Australian] dollars,” he said
“Now, if we go back to 2018 and compare that to the 2024 raw numbers of people with an individual TPD policy, the industry-level data shows it has decreased significantly over that period of time.
…a reduced number of people in the pool are needing to fund that increased overall claim cost…
“We’ve got a decrease of the number of people in the pool, we’ve got a slightly higher claim rate, and those claims are being paid at a significantly higher average [dollar value].”
He linked this trend to premium increases, “…a reduced number of people in the pool are needing to fund that increased overall claim cost.”
Current products
Looking at current product design in Australia, Ross urged advisers to focus on how they position disability cover.
“People need to understand what’s going to be right for them,” he said. “It might be helpful to almost frame it around how this is dealt with between public sector and private [support].
“The costs that come with disability will ultimately help them arrive at the right solution, the right mix when it comes to trade-offs as to what they’re going to privately fund and what they’re going to insure for, and what they’re going to leave, and rely on the public sector to support them.”
He added that even if products evolve, advisers should focus on making the most of today’s offerings by framing cover around the specific problems it protects against, and the associated financial costs.
“A risk-based conversation around disability is always a great starting point, and that conversation has to flow off a needs-based conversation,” he said.