Changes Coming To Income Protection

Zac discusses the proposed changes and how they might affect you and your income protection policies

Changes Coming To Income Protection

Recently the Australian Prudential Regulation Authority (APRA) has been looking into the proitability (or lack thereof) of insurers and have put some policies in place in response to the substantial ongoing losses in the income protection market. These changes will have big effects on future insurance policies issued.


So what are the changes coming in March?


From the 31st of March, agreed value policies will no longer be available. This means that all policies issued after that date will be subject to the indemnity rules, meaning that you will have to prove what you earn at the time of claim rather than locking in an agreed amount at the application stage. This means that you will need to make sure that you are constantly reviewing your income protection policy going forward because if you have a higher amount and you have taken on a job earning less money or potentially have gone part time you may not get paid out for the amount of cover that you are paying for.


What other future changes are coming?


From 1st of July 2021 there are a number of future changes coming to income protection policies, these include:

  • Benefits will be based on your earnings from the past 12 months and you won’t be able to go back further than that.
  • Yearly guaranteed renewable will be replaced with contracts that cannot be guaranteed renewable for greater than 5 years. While it proposes that the policy owner can elect to renew their contract for further periods (not exceeding 5 years) without having to undergo a medical review, the renewal will be subject to an analysis of changes in your occupation and financial circumstances. This means that if you start a new job that is what’s defined as a ‘riskier’ occupation you could be adversely affected.
  • To encourage clients to recover and return to work sooner, insurers should have controls in place to reduce the risk of long-term benefit periods. This will mean harsher disability definitions and setting internal benchmarks for new income protection products with long benefit periods. This could mean that it becomes harder to claim on new income protection policies.


In addition to all this, insurance companies will have to provide data to APRA so that it can keep an eye on what is happening.


So what does this mean for me?


If you are in the process of putting an income protection policy in place then it might be important to get moving on it quickly so that you’re not affected by the changes. If you already have an income protection policy in place then you need to be aware that by re writing your policy with another insurer after the date of the proposed changes may mean that you’re subject to the new rules and therefore disadvantaged so be sure to double check if you’re looking to move or cancel your income protection that you know the consequences of doing this.


If you have any questions about the proposed changes, feel free to email me at