The Actuaries Institute has called for urgent reform of Australia's $5 billion disability income insurance sector.
The institute said it has established a taskforce saying that failure to implement significant changes will reduce consumer access to affordable disability cover in the future.
The institute commissioned KPMG to compile a comparative research report named Disability Income, An International Comparison.
Actuaries Institute chief executive Elayne Grace said: "This is a valuable contribution that will help the profession identify and tackle some of the issues that are impacting the DII market."
The report said the sector needs simpler products, a change to definitions, and a review of the benefits to encourage those who can, to return to better health as soon as possible.
Ian Laughlin, convenor of the Actuaries Institute's Disability Insurance Taskforce said modern life insurance provides valuable financial benefits for people who can't earn an income due to injury or sickness.
"Australia has a very competitive market and customers have been offered a smorgasbord of product features. However, they have also been subjected to multiple unanticipated premium increases."
Laughlin said a decline in insurance company profitability despite these steep premium hikes has called into question the sustainability of disability income insurance in its current form, and suggests the potential for market failure.
"That raises real concerns for consumers, and the broader community, about future access to affordable DII cover," he said.
The KPMG report said individual disability income insurance does not adequately support a policyholder's move back into work in Australia's modern economy and acknowledged increased concerns by Australia's regulator about product sustainability.
Daniel Longden, KPMG actuarial and financial risk partner, said: "Our research found that Australian workers tend to have higher payouts than their counterparts in comparable jurisdictions. A replacement rate of 75% of earnings is quite common in Australia with up to 80% replacement ratios available."
"By contrast replacement rates in the US are generally 50-65% of income, and in the UK 60-65% of income."
"In some circumstances, where an Australian policyholder has an income replacement ratio of 75%, the policy may typically permit more than 102% of pre-disability take-home pay. A high replacement ratio can be a disincentive to returning to work."
In December, the Australian Prudential Regulation Authority said that life companies collectively lost around $3.4 billion over the past five years through the sale of DII to individuals.
APRA executive board member Geoff Summerhayes, at the time, said life companies had kept premiums at unsustainably low levels and policy features were too generous.