Employee Benefits
The Australian Prudential Regulation Authority (APRA) is making changes to new individual personal retail income protection policies after years of material losses have made the product offering unsustainable.


The changes do not impact Group Income Protection cover (companies with 20+ employees) or existing individual personal retail income protection policies.


From October 1, 2021, changes to new individual personal retail income protection policies are as follows:
  • Income replacement ratios will be reduced from 75% to 70%. This means in the event of an income protection claim after October 1, 2021, the claimant would receive up to 70% of their income after 6 months of the claim.
  • During the first 6 months of a claim, a claimant is entitled to up to 90% of their income, depending on the policy they have entered.
  • Income will be calculated over the 12 months before the claim, compared to some current policies which use the highest rolling 12-month income over the last 2 or 3 years to smooth out fluctuating income.
  • Guaranteed renewable policies will no longer exist. Long benefit periods, such as up to age 65, will be managed and reviewed to help ensure there is motivation to return to work. Insurers understand that long-term claims are costly to businesses and in effect, cause premium increases for existing clients.
  • This may include changing from “Own Occupation” to “Any Occupation” definition after 2 years on the claim. “Own occupation” refers to the individual’s job when they make a claim, “any occupation” refers to an occupation the individual can fulfil, despite still being unfit for their own occupation.
  • Income protection policy terms must not exceed five years (from 1 October 2022). After the five years, a new policy must be entered into that reflects the terms and conditions that apply to new contracts then on offer by the life insurance company. If an individual enters a new contract after the initial five years, medical underwriting is not required. Any changes to the client’s occupation, financial circumstances, and dangerous pastimes must be updated and reflected in the new policy.


Companies with existing Group Income Protection cover or those looking to establish one (minimum headcount 20+ employees) will not be impacted by these changes.



To find out more about these changes or to understand your options for implementing Group Income Protection cover, please reach out to your dedicated Honan Global Benefits contact.



Learn about Superannuation Stapling – coming on November 1, 2021

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