Surge in Claims for Non-Advised Disability Income Insurance

Recent analysis reveals individual non-advised disability income insurance is leading the pack with a remarkable claims paid ratio of 113%.

In stark contrast, individual policies acquired through personal advice boast a much lower ratio of 68%, as outlined by the latest prudential data.

For disability income insurance (DII) products distributed via group superannuation and group ordinary channels, the claims paid ratios stand at 99% and 74% respectively over the 12-month period ending in June. These figures are based on a projected 24-month claims payment period.

The standout 113% ratio for individual non-advised DII underscores a scenario where claims payments surpass premiums collected, setting it as the leader among seven product categories available through four distinct sales channels.

Beyond individual non-advised DII, other product classes include total and permanent disability, death, trauma, consumer credit insurance, funeral, and accident insurance.

Interestingly, the Australian Prudential Regulation Authority (APRA), which is the source of this comprehensive data—originally reported by a financial industry publication, provides no additional commentary on these biennial life insurance claims and disputes statistics. Nevertheless, APRA’s recent annual report highlights ongoing endeavors to enhance the sustainability of individual DII products, which last year led to a reevaluation of capital requirements for select insurers.

Additional APRA data illustrates varying claims paid ratios for total and permanent disability (TPD) coverage: individual-advised has a 55% ratio, individual non-advised 58%, group super 100%, and group ordinary 37%.

Disability income insurance also tops the charts in terms of dispute frequency: for individual-advised products, there are 334 disputes per 100,000 lives insured, while the non-advised channel experiences even higher contention at 425 disputes per 100,000.

Published:Wednesday, 6th Nov 2024
Source: Paige Estritori

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Surge in Claims for Non-Advised Disability Income Insurance