Funds, insurers and consultants are calling for the creation of an insurance product that sits half way between TPD cover and income protection.
Speakers and delegates at the third annual Conexus Financial/ AIA Group Insurance Summit, held in Sydney, found common accord not only that TPD was a major cause of soaring premiums, but it was often the wrong benefit for members too.
Jeff Humphreys, a scheme actuary for CHR Consulting, saw the ideal disability cover as offering a small, initial lump sum to pay for any lifestyle changes or treatment an individual needed before moving to an income protection payment.
Martyn Gilling, vice president, business development at RGA, said most people who were unwell wanted to return work and that TPD was too black and white in its definition for them.
Jenny Dean, principal and actuary for Aon Hewitt, saw a barrier to any new product as the difficulty of communicating it to members who had been educated to expect a large lump sum payment if they became seriously disabled.
She added the low size of the lump sum in such a hybrid benefit would end the interest of law firms that had gained a percentage of bigger TPD claims won for their clients.
Another proponent of this hybrid benefit was Michael Rooney, deputy chief executive of Media Super. He envisaged an initial lump sum to pay for expensive treatment that could help with lifestyle chances and aiding individuals to re-enter the workforce and then paying income protection for a period of five years. He said the lure of a large lump sum was in some cases encouraging members to end rehabilitation.
Leann Yuen, director of financial services for KPMG, told delegates reinsurers would not re-enter the market without changes to the relative generosity of TPD and compared the eligibility requirements in Australia to higher hurdles for disability insurance in the UK, Canada and South Africa.
Greg Brunner, general manager, supervisory support division at APRA, who spoke at the conference said the regulator would not stand in the way of any regulatory amendments that allowed such a product to be created, if there was sufficient support for it. He noted the regulator had already highlighted the need for innovation in group insurance.
Bang, there go the premiums.