Income Protection Contract Term Extension
Income Protection Contract Term – APRA Gives Insurers One Year Extension
The corporate regulator (APRA) has given life insurers another year to find a workable solution around applying maximum five-year terms for income protection insurance contracts.
The change expected to come into effect from 1 October 2021 has now been extended by one year. APRA have effectively recognised feedback received around the challenges manufacturers say they are facing in implementing the regulator’s policy contract term measure.
The regulator notes it considers its IP policy contract term measure to be an important mechanism to manage the risks associated with long contract terms. It says “Without the policy contract term measure, it is unlikely there will be a change to the current practice that effectively locks in terms and conditions for extended periods of time, leaving premium changes as the primary (or only) lever to deal with the impact of external changes on IDII sustainability.”
While allowing more time for insurers to address the issue of IP policy contract terms, APRA adds in its letter that it expects all other measures in relation to individual disability income insurance, as outlined in its 30 September 2020 letter, will take effect – as scheduled – from 1 October 2021.