Written by Aaron Alston – Financial Adviser
Changes Are Expected Effective 1 October 2021
Recently, the Australia Prudential Regulation Authority (APRA) announced that it was concerned that life insurance companies have been keeping premiums at unsustainably low levels to compete for customers. APRA expects that with effect October 2021 life insurance companies will offer new income protection contacts. Some of the major changes being discussed are:
- The insurer can change the terms and conditions of the policy to the current product – occupation, pastimes and finances are re-underwritten every 5 years. This is vastly different to the current policy where it is guaranteed renewable regardless of changes in your occupation, pastimes and finances.
- Pre Disability Income for a stable income will be 12 months prior to the disability. For those with fluctuating income (e.g. contractors, self-employed) the insurer can use the AVERAGE of the last 3 years. Again this is very different to the current indemnity type policies where the insurer will accept the HIGHEST years income from the last 3 years prior to the disability.
- Maximum sum insured being reduced from 75% to 70% including any additional payments made for ancillary benefits.
There are other changes being discussed however these are the major three. Further details will be provided to Hudson members closer to October when there is more information.
What Happens To Existing Policies?
Existing policies which are currently guaranteed renewable will not be affected. If you are happy with your current policy definitions there is no cause for concern.
If you don’t have Income Protection in place, now is definitely the time to review before any changes are legislated. If you wish to review your Income Protection need, please call 1800 804 296 or submit a contact form directly on our website.