The Actuaries Institute has released its final report looking at ways to return the ailing individual disability income insurance (DII) market to a sustainable path.

Released today, the report by the institute’s Disability Insurance Taskforce follows more than 12 months of critical examination of the sector, which has seen individual DII providers lose more than $2 billion since 2018.

The report has made a raft of proposals addressing many areas such as regulation and the law, financial advice, underwriting and claims management, risk management and product features.

With product features, the taskforce says simpler and cheaper product alternatives should be introduced.

Life insurers, without necessarily changing the use of financial advisers or making other changes to distribution, should thoroughly investigate consumer preferences for features/price trade-offs and introduce simpler/cheaper product alternatives.

They should also produce products suited to different market segments, with one outcome being clearer differentiation on benefits and on cost.

On underwriting and claims management, the institute says life insurers need to develop a strategy to improve in this area. The strategy must identify gaps in current practices and develop action plans accordingly.

The taskforce also recommended a review of the 1995 Life Insurance Act. It says Treasury and the Australian Prudential Regulation Authority (APRA) ought to look into the Act and other relevant legislation, focusing on their “fitness for purpose in modern markets and society.”

The report says a “path forward for the industry” has been developed.

“This will involve change and contribution by the many participants in the [individual] DII ecosystem,” the report said.

“However, there has been very positive support for the work of the taskforce, and the taskforce is confident that there now is real momentum for change. The challenge now is to make it happen.”

Former APRA deputy chairman Ian Laughlin led the work and the recommendations reflect consultation and feedback from policymakers and regulators, insurers, consumer advocates, ratings houses, and industry representatives such as the Financial Services Council (FSC) and others.

APRA and the FSC had observer status throughout the development of the taskforce’s recommendations and various hearings and seminars have helped formulate the findings.

“Nearly everyone we have engaged with and listened to is aware that change is critical,” Mr Laughlin said. “The challenge now is to embrace the recommendations.”

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