AIA Australia Highlights Need for Structural Reform in Life Insurance

Since 2014, mental health claims have doubled, now accounting for approximately 70% of AIA Australia's claims, predominantly from white-collar workers. This trend has been exacerbated by factors such as the COVID-19 pandemic, hybrid work environments, and digital disruption, leaving many individuals struggling to adapt.

Mu highlighted the affordability challenges faced by consumers, noting that most households could afford only two mortgage repayments if they lost their income. With rising premiums and everyday expenses, maintaining life insurance coverage has become increasingly difficult for many Australians.

To address these issues, AIA Australia is focusing on sustainable pricing and severity-based product design, moving away from comprehensive, high-cost Total and Permanent Disability (TPD) cover. The company's TPD Assist model, which supports clients' gradual return to work, has delivered positive outcomes and will inform future product refinements.

Mu urged advisers to reassess product selection through a long-term affordability lens, emphasising that while comprehensive cover might seem attractive upfront, sustainability matters more to clients who need to maintain protection over time. He also called for industry collaboration to modernise best-interest duties and support the transition to more sustainable life insurance structures.

This call to action underscores the need for the Australian life insurance industry to adapt to changing societal needs and economic realities, ensuring that products remain accessible and relevant to consumers.