The prudential regulator has no immediate plans to act on the total and permanent disability line, even as worsening mental health claim losses raise questions over its viability.

Australian Prudential Regulation Authority executive director for life and superannuation Jane Magill says the complex challenges facing TPD require “disciplined risk management and co-ordinated action across claims, product design and stakeholder alignment.

“The question now is whether the industry can act swiftly and reset before sustainability erodes further.

“We have been asked whether APRA will intervene, including through measures such as prescribing product definitions or applying capital adjustments. We do not intend to do so at this stage.

“Unlike [individual disability income insurance], this is a more complex challenge and does not have a single, straightforward solution.”

She says the regulator will continue to support the industry’s search for answers, noting progress as some insurers pursue data-led product innovation and engage with partners including superannuation trustees.

APRA will work with the Council of Australian Life Insurers and continue to diagnose problems through thematic reviews.

“There is currently no industry consensus on what a sustainable TPD product should look like, although APRA is seeing some insurers actively pursuing innovation,” Ms Magill said.

She says current TPD products were “never intended to accommodate” a sharp rise in mental health claims.

“Put simply, TPD is now being asked to solve an issue it was never built to address … and there is no textbook solution waiting on the shelf … And a solution will not come from waiting for perfect conditions or pulling one lever.”