The former chief executive of TAL has slammed life insurers' ineptitude in managing disability income products, invoking the industry to come together and find a solution by the end of the year.
Speaking at the 2021 Actuaries Summit on Wednesday, Jim Minto reflected on the "broken" state of disability income benefits, which are increasingly becoming unaffordable and being shunned by people who need it the most.
"The community suffers in a wider sense from poorly designed and over-engineered products. Including products, I designed when I was chief executive. They delivered generous benefits in most cases to some, while policyholders generally faced cycles of price increases as companies looked to recoup losses from unsustainable products," he said.
The market is littered with legacy disability products deemed expensive and poorly valued.
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For example, products created in the 1990s with lifetime benefits had "disastrous consequences" and many of these policies are still in force charging large premiums.
The current chair of Swiss Re Life & Health Australia told insurers to get their act together and provide a solution by the end of the year - or else face another scenario similar to the Life Insurance Framework.
"The Life Insurance Framework came about because the industry could not commit to unified action when we were being told by the regulators and government we had to," Minto said.
"We complain about the framework, but we caused it. We couldn't act. Here we are again with disability income. Can [the industry] act?"
Minto is urging insurers to come up with a solution by the end of 2021, or else face another "higher, capital charge imposed on all participants".
Not mincing words about the state of Australia's life insurance industry, Minto criticised its failure to unify, which has ultimately led to an erosion of profitability.
"If we had true alignment in the industry, sales manager and company executives would be receiving negative bonuses each year from distributing loss-making products and destroying shareholder value. Customers aren't happy either," he said.
"Shareholders are hurting with losses and capital injection, yet we still struggle with the simple idea that we need to change and act together to do this."