31 Mar Income Protection Contracts – Out with the Old and in with the New
APRA has finalised their intervention¹ of Income Protection policies with the last of the changes to be rolled out effective 1 October 2021. IP insurance has become an unsustainable product for many insurance companies, with substantial losses experienced across the industry.
We have observed substantial increases in premium for existing policy holders in recent years and. Unfortunately. anticipate that this is likely to continue for years to come. Some insurers appear to be managing the premiums of existing policies better than others, however all are impacted by claims, current interest rates and reduced distribution.
For policies incepted from 1 October, we are particularly aware of two changes that will significantly impact policy holders.
Income Substantiation
In the event of a claim, a policy holder deemed as a ‘stable income earner’ must substantiate their income earnt for the 12 months immediately prior to claim. This is materially different to many of the current contracts that have an ‘Agreed benefit’ or provide the opportunity to evidence ‘the best 12 of the last 36 months’.
5-Year Policy Contract Term
Contracts will be for a term not exceeding five years, after which a new contract will be offered, without medical review, on the insurers terms and conditions applicable at that time. Also, any changes to individual circumstances such as occupation, financial circumstance, dangerous pastimes, pursuits, and broader societal and economic changes, will be reconsidered at each end of a five-year term.
Contact MBS Insurance for a comprehensive review of your insurance so that you are aware of your options before policies change in October.
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