OPINION PIECE - by Aidan Nguyen, Policy Manager – Life Insurance
In recent weeks, the FSC and KPMG released the results of the latest industry-wide analysis of Disability Income (DI) claims for the life insurance industry. This experience investigation comprises an extensive data collection and analysis based on more than 130,000 claim records between 2014 and 2018. To be clear, this is no small feat. It is a credit to all those working within the industry who have worked hard to provide high quality data and have financially supported the project.
The FSC had over 800 total people in attendance for a recent series of webinar presentations (across three sessions). This high level of engagement is perhaps unsurprising given the importance of this work in providing early insights that will help with solving one of the biggest challenges currently being faced by the industry. Those working in life insurance are only too aware that many of the products are under water. According to APRA data, life insurers have collectively recorded almost $1.5bn in losses for individual DI insurance (that is DI insurance not written through superannuation) in the year to 31 March 2020.
It is not just the insights of the experience investigation that will help. The underlying data will feed into the new industry standard table for DI. Industry standard tables are the actuarial basis on which life companies write their policies. When this table is released (expected to be the end of this month), Australia will have available the most up to date and detailed DI table in the world. For comparison, the most recent industry claims table available in the US (from the Society of Actuaries) is based on data relating to the period between 1990 - 2007.
This focus on data will only continue going forward. APRA, Australia’s prudential regulator, has made clear that they expect the DI industry standard table to remain relevant and based on up-to-date data. What this will mean is that life insurers will need to have strong and robust data capabilities to ensure they can continue to contribute to future industry experience investigations in a timely manner. The end outcome is to get to a stable and well-priced DI insurance product. This is, of course, a great outcome for industry, but even more so, for Australian consumers.