According to Altus Financial director and senior risk adviser Alexandria Thomaschuetz, ongoing premium increases are the result of long-standing product designs colliding with modern claims experience, rather than short-term insurer behaviour.
“For a long time, income protection benefits were more generous than the underlying risk pricing could support,” she said.
Income protection has emerged as the most exposed product line during the repricing cycle, driven by higher-than-expected claims incidence, longer claim durations and regulatory intervention in benefit design, alongside rising reinsurance costs. Mental health claims, in particular, have materially altered insurers’ risk assumptions.
“The mental health component changed the risk profile materially,” Thomaschuetz stated.
Industry commentary from the Council of Australian Life Insurers has consistently identified mental health as a leading contributor to income protection volatility, with extended claim durations challenging earlier pricing models.
The repricing environment has created difficult renewal discussions, even for long-standing clients with no claim history, Thomaschuetz said.
“Clients feel penalised for systemic issues they didn’t cause,” she added.
“That’s where adviser education is critical. We are increasingly required to explain that premium movements reflect structural and regulatory changes across the market, rather than the individual.”
Premium pressure has also reignited comparisons between retail insurance and default cover held within superannuation, a comparison Thomaschuetz said is often made without sufficient analysis.
“Cheaper premiums usually reflect reduced risk for the insurer, not better value for the client.”
She also pointed to narrower definitions, shorter benefit periods, limited tailoring and reduced certainty around long-term suitability as common differences in default superannuation cover as client circumstances evolve.
Beyond income protection, insurers and reinsurers are reassessing benefit structures in total and permanent disability insurance, with staged or proportional benefit designs being explored to better align payments with rehabilitation outcomes and long-term sustainability.
In response to repricing pressures, advisers are increasingly using structural design levers rather than defaulting to product replacement. These include recalibrating benefit and waiting periods, incorporating partial self-insurance strategies as clients accumulate wealth, optimising policy ownership and segmenting cover based on specific needs.
“This is about designing resilience, not just lowering premiums,” Thomaschuetz said.
Despite the disruption caused by the repricing cycle, she believes the shift toward more sustainable product design could lead to improved outcomes over time.
“Products are now being built with sustainability front of mind. That should lead to fewer repricing shocks over time – but only if expectations are set correctly.”
