New perspectives on Group TPD sustainability

Group TPD sustainability continues to be a key focus across the industry. At the All Actuaries Summit last month, two sessions explored what product evolution could look like, and how the industry can move forward together. 

Group TPD: the case for recalibration

Michael Lin (TAL), Richard Land (AustralianSuper) and chair Joyce Wang (Cbus) opened with a look at the current landscape.  

The session opened with the scale of what group insurance delivers, noting that in 2023/24, life insurers provided $8.3 billion of income support to Australians unable to work due to disability or illness, representing 11 percent of all national income support, when sick leave benefits are included.¹ It examined how the current TPD product model is being challenged by rising mental health claims, how lump sum benefit structures may be a disincentive to treatment, and definitions of disability that were designed for a different era. It also considered how funds can evolve their approach while meeting member expectations and maintaining confidence in the system.

Key messages: 

• Current lump sum structures are being tested. The industry is challenging whether large lump sum structures can create misaligned financial incentives and sufficiently encourage treatment.
• TPD definitions may not reflect how people work today. The concept of “total and permanent disability” is increasingly difficult to reconcile with recovery pathways, particularly for mental health. The “education, training and experience” (ETE) framework was designed for single-career working lives and doesn’t account for modern workforce mobility.
• New design approaches are emerging. Several funds have restructured default insurance around income protection and modest TPD cover. The retail market has also launched TPD alternatives including instalment-based payment structures or severity-based definitions.
• Evolution requires careful balance. Any changes need to weigh adequacy of cover, community expectations around mental health, and the costs of new structures.

Workers compensation reform and its implications for super 

Recent workers compensation reforms have highlighted the need to review the role of insurance in super as a safety net for Australian workers.  

A session co-presented by Amy McDonald, TAL’s Head of Product and Pricing (as a member of the Actuaries Institute’s Insurance in Super Sub-Committee), outlined how psychological injury claims –while only representing a small share of workers compensation volumes  (around 10%)– are driving a disproportionate share of scheme costs (around 30%), prompting reform in most states.²

Key messages: 

• Eligibility is tightening across most jurisdictions. Reforms have included narrower definitions of mental injury, stricter employment causation tests, and higher impairment thresholds to receive long-term benefits. Victoria’s changes took effect in March 2024. NSW reforms are set to commence from 1 July 2026, making this a live consideration for funds with members in those states. 
• Workers compensation reform is expected to impact insurance in super. Changes in access may affect how disabled workers are supported, alongside shifts in number of claims, how long they will last, and what they will cost.
• Early signs of improvement in some states, but results are mixed. In Victoria, return-to-work rates have improved to 43% at six months and 60% within two years, and the state’s workers compensation scheme reported an actuarial surplus for the first time in over a decade.³ Western Australia has seen workers taking time off for psychological injuries double since 2021/22.⁴
• Rehabilitation programs experience is emerging. Victoria and NSW are both pairing tighter eligibility with structured return-to-work support. The evidence on whether this translates into improved outcomes is still emerging. 

While these trends are putting pressure on group insurance, it’s important for the industry to continuing exploring and testing solutions that will ensure members can access fit-for-purpose cover that meets the needs of today’s workforce.  

As Richard Land commented, “Members might not understand all the terms and conditions, but they expect them to be fair and reasonable.” 

For more on the underlying trends, see Inside the rise of mental health TPD claims. Speak to your Partnership Manager to discuss further. 

¹  Cross Sector Project Update, 2026.

²  Worksafe Victoria. Claims statistical report by calendar year. 2026.

³ Worksafe Victoria. Annual Report 2024-25. 2025.

⁴  WorkCover WA. Workers compensation in Western Australia, Annual statistical report 2024/25. 2025.