The Australian Prudential Regulation Authority is in “active engagement” with the life industry to address challenges facing the total and permanent disability product line.

Concerns over the viability of TPD offerings have come to the fore following Swiss Re’s decision to pause all new life business here until it sees that sustainability issues have been addressed, particularly in relation to TPD products. 

“APRA is aware of the challenges related to increasing claims experience for TPD products offered by life insurers,” a spokesperson told insuranceNEWS.com.au today.

The spokesperson says the regulator “has been actively engaging with insurers and [the Council of Australian Life Insurers] to better examine root causes and actions insurers are taking or planning in response to these challenges.

“APRA acknowledges the complexity being experienced with TPD, including those related to mental health claims. APRA notes that insurers and industry are actively leaning into TPD-related issues and expects that the industry takes proactive leadership to improve the sustainability of TPD and creates better customer outcomes.”

The spokesperson says the authority “will continue to monitor the developments, including ongoing engagement with insurers and the industry to uphold prudential soundness within the sector and ensure policyholders can have confidence in their insurers’ reliability when needed”. 

Swiss Re Australia and New Zealand life and health reinsurance head Lloyd Campbell Gibson says the company remains committed to the local life market as a reinsurance partner.

He says last week’s announcement “means we are withdrawing from quoting for new business and will focus on working with our existing retail life insurance company partners to drive sustainable product design, particularly in TPD insurance, where there are significant sustainability issues that require urgent attention to better protect consumers over the long term”.

The reinsurer says the changing nature of work, rising claim costs and evolving societal expectations have driven discussion around the long-term sustainability of TPD cover.

Last month, Acenda flagged concerns over the TPD line. The insurer said its retail TPD claims for mental illness increased 171% between 2018 and 2023, and during the same period claims for musculoskeletal conditions went up 166%.

“As TPD claims increase, so too does the cost of TPD premiums,” Acenda individual insurance chief executive Gerard Kerr said.

“As an industry, we must step up and provide alternative TPD solutions to meet the evolving needs of customers, especially as rising claims continue to drive higher premium rates higher for new and existing customers.”