ARTICLE

Transforming Total and Permanent Disablement Insurance to Better Serve Australians

7 May 2024 dot  4 mins read
Total and Permanent Disablement (TPD) insurance within superannuation is a crucial safety net for Australians, offering financial protection in the event of disability, ensuring that they can maintain their standard of living and preserve their retirement savings.
 
However, despite its importance, there are challenges threatening the long-term sustainability of group TPD insurance. It's essential for the industry to address these challenges to ensure that the cover remains affordable, accessible, and fits the diverse needs of all working Australians.
 
AIA has conducted extensive research with members of superannuation funds, including those who have previously been TPD claimants. The research findings aim to transform TPD insurance, making it more sustainable and aligned with the varying needs of members. 
 
One significant finding from the research is that there is no one-size-fits-all approach for disability insurance in superannuation. AIA believes that Trustees need to balance their responsibilities to the fund as a whole with the need for flexibility and choice for individuals to tailor their cover to suit their specific needs.
The research highlighted several key insights, including:
 
  • Education and Financial Advice: Members need better education about default insurance to ensure they are aware of their cover when they suffer a disability and would benefit from financial advice to assist claimants in navigating their future finances.

  • Early Financial Support: Claimants would benefit from earlier financial support and access to rehabilitation and well-being support services to aid recovery and return to the workforce.

  • Recovery and Return to Work: Up to 20% of TPD claimants have either returned to work or have the ability to do so.  Terms like "total" and "permanent" also create a perception that recovery is unlikely, affecting the mindset of claimants.
Based on these insights, there are several transformative strategies AIA believes Trustees should consider, including:
 
  1. Payment of initial benefits without the assessment of permanency, especially in claims with subjective health conditions.

  2. Changes to the claims process to focus on well-being support rather than just TPD assessment.

  3. Increasing collaboration with support providers to improve awareness and assist with early intervention.

  4. Providing more guidance and advice to claimants about how to use their benefit.

  5. Implementing a regular payment structure to aid early intervention and immediate financial support.
AIA proposes a modern disability insurance solution that offers a safety net of default insurance with flexible policy terms and personalized options. This solution focuses on a regular income stream model, balancing insurance costs with the needs of the membership, while retaining an insurance design that best caters for severe illnesses or injuries.
Utilising the detailed information gained from member and industry research, as well as in-depth claim analysis, AIA has also developed a decision framework to assist trustees in tailoring this modern disability insurance solution to better fit the unique characteristics of their specific membership demographics. 
 
Given the findings, AIA is committed to working closely with Trustees to recommend changes to TPD insurance designs to ensure that default disability insurance in superannuation continues to meet the diverse needs of all Australians.