Income protection changes 2020

APRA has released several measures that affect income protection insurance, especially in relation to the agreed value benefit type.

Further to our post about the moving parts of income protection its important to stay on top of your need for income in terms of what benefits best suit your changing circumstances.

In our related Knowledge Centre article about income protection insurance, we talk about how our capacity to earn an income is one of the biggest resources available to fund lifestyle expenses and accumulating superannuation and wealth.

Although, this income-earning capacity can sometimes be taken for granted.  

When we are feeling fit and healthy, we may think we are less likely to experience an unexpected financially adverse event, than others.

For example, being unable to work for a period due to a sickness or injury:

• In our working life, we have a 60% chance of being disabled for 1 month, and a 33% chance of being disabled for more than 3 months*. Coupled with this, if we are off work for:
  • ‘20 days, the chance of ever getting back to work is 70%.
  • 45 days, the chance of ever getting back to work is 50%.
  • 70 days, the chance of ever getting back to work is 35%’^.

APRA has released several measures aimed at improving the long-term sustainability of individual (not group) IP insurance, for the benefit of both insurers and policyholders.  The first of which commences from 31 March 2020 with the discontinuation of “agreed” income protection new policies from that date.   Continue reading…