AIA Australia Highlights Need for Industry Adaptation

During a recent presentation, Mu highlighted that mental health claims have doubled since 2014, now accounting for a significant portion of total claims. This surge, coupled with rising premiums and cost-of-living pressures, poses a threat to the current life insurance models.

Mu pointed out that many households could only afford a limited number of mortgage repayments if they lost their income, underscoring the critical role of life insurance in financial security. He advocated for a shift towards sustainable pricing and severity-based product designs, moving away from comprehensive, high-cost Total and Permanent Disability (TPD) cover.

AIA Australia's TPD Assist model, which supports clients' gradual return to work, has shown promising outcomes and may inform future product refinements. Mu also urged advisers to consider long-term affordability when selecting products for clients, emphasizing the importance of maintaining protection over time.

Collaboration among industry stakeholders, regulators, and advisers is essential to modernize best-interest duties and support the transition to more sustainable life insurance structures. This proactive approach aims to address the challenges posed by rising mental health claims and economic pressures, ensuring the industry's resilience and continued ability to serve policyholders effectively.