In a speech on total and permanent disability insurance, the Australian Prudential Regulation Authority said the current TPD model is being tested by a structural rise in mental health claims and does not intend, at this stage, to prescribe product definitions or apply capital adjustments. Mental health claims now account for one in three TPD claims paid, and claims among people in their 30s have risen by more than 700 per cent over the past decade, indicating that the product is being used for risks it was not originally designed to cover. Drawing on a recent thematic review of insurance risk management practices and a joint chief executive roundtable with the Australian Securities and Investments Commission, APRA highlighted three areas where change could improve sustainability. Claims functions need more capacity, capability and new approaches for complex cases. Product design needs to address the limits of lump sum benefits and the TPD label, particularly for people with episodic conditions, and consider earlier intervention. Stakeholder alignment also remains a constraint because superannuation trustees control group insurance design, a narrow interpretation of Best Financial Interests Duty can slow change, and advisers and research houses can favour older retail products over newer designs. APRA said it will continue thematic reviews and share better practices, help convene insurers, trustees and the Council of Australian Life Insurers, and engage with government and other agencies on legislative settings that may be constraining more sustainable product design.
Australian Prudential Regulation Authority2026-05-27
Australian Prudential Regulation Authority flags mental health driven TPD sustainability pressures and rules out product definition or capital changes for now
The Australian Prudential Regulation Authority warned that the total and permanent disability insurance model is under strain from rising mental health claims but does not plan to prescribe product definitions or adjust capital. A thematic review and joint roundtable with the Australian Securities and Investments Commission identified needed improvements in claims handling for complex cases, product design for episodic conditions, and stakeholder alignment in group insurance. APRA will continue thematic reviews, share better practices, convene industry stakeholders and engage with government on legislative settings affecting product sustainability.