Evolving TPD insurance to meet modern needs

• Keely O’Brien, General Manager of Corporate Affairs and Strategy, Council of Australian Life Insurers (CALI) 
• Raelene Seales, CEO of Prime Super.

Dan opened the discussion by highlighting the scale of the challenge facing the industry and the impact on members and their families. Mental health conditions are now a leading driver of TPD claims, and this increase has been sharper among younger members.  

As Keely explained, “When you think about someone in their 30s making a TPD claim, they're missing out of 30 years of work. That's 30 years of also contributing to their super. It means they'll have a different life outcome.”  

For younger members in their 20s or 30s, being declared permanently unable to work can have long-lasting consequences, potentially affecting decades of income and super contributions. For conditions that may be episodic or recoverable, a permanent incapacity assessment and a lump sum TPD payment don’t set them up for long-term stability.  

Structured support, recovery pathways and help to re-engage with work when they’re ready are more appropriate than a product built for lifelong incapacity. 

Unpacking the challenges

Current TPD products weren’t built for the episodic nature of some mental health conditions. Cycles of illness over several years make it harder to determine permanent incapacity. 

Keely noted that diagnosis alone rarely gives a full picture, and traditional assessment frameworks were never designed for conditions that may improve. Raelene added that service standards need to reflect these complexities, and better data sharing between funds and insurers will help reveal claim patterns and guide targeted member support. 

Regional disparities are another concern that continue to influence outcomes. Around a quarter of TAL’s insured members live outside metropolitan areas, yet they account for 35 percent of mental health-related TPD claims.  Raelene described the situation as particularly dire for rural communities and stressed the importance of targeted support. 

Higher sums insured are also contributing to rising claim costs. Over the last two years, TAL data shows a 78 percent increase in TPD claims across our group portfolio where the sum insured is above $750,000.   

Dan noted that trustees may not fully appreciate how higher cover levels influence overall claims experience, which adds pressure on the sustainability of insurance in super. This also raises a concern about default members carrying more of the load than they should.  

Given the varied context and product designs of each fund, there is an opportunity for trustees to analyse their own membership experience to better understand this issue. 

Shaping the industry's response

The panellists agreed that addressing these challenges requires coordinated action across the industry through change initiatives that address assessment processes, member support and product design.  

Keely spoke about the importance of early intervention and recovery-focused solutions. “Is the answer TPD or is it about making sure that we're best supporting members to get them healthy and back to work and back to contributing?”  

Funds can support prevention by offering education, early intervention programs and access to support services with insurers, which is largely important for regional and rural communities. 

Raelene pointed to the role of data in improving solutions. “The more we can learn about the complexities of claims and looking at case studies around group and claim types in the TPD space, the more we can learn how we can better serve members,” she said.  

This includes understanding how factors like higher sums insured and changing member profiles shape claim trends and using those insights to guide product settings and support structures. 

Strengthening group TPD cover for the future

TPD insurance through super remains an important safety net that protects the financial security of millions of Australians. Modernising assessment frameworks so they better respond to mental health conditions will help more members receive timely and meaningful support.  

Product design also needs to reflect modern needs, moving toward income-style models rather than large lump sums, focusing on support that helps members adapt and return to work when recovery is possible, and setting cover levels that protect default members.  

Considering the purpose of insurance in super, one of the core principles in addressing these challenges is to affordably protect the default membership. Appropriate cover levels keep the safety net sustainable for default members. High sums insured, often through voluntary cover, can increase claim costs and put pressure on affordability. 

Dan closed the session with a reminder the industry’s shared responsibility.  

"We need to make sure the members who are making these claims get the support they need, while also protecting the safety net for the broader membership."