An Actuaries Institute task force has recommended ways to improve the retail disability income insurance market, including providing examples of best interest duty (BID) in life insurance.
“The task force believes that the interpretation of BID for life insurance has evolved over time, and advisers tend to recommend the most feature-rich policies and rely on rating houses to identify those products,” the task force said, as reported by the Financial Standard.
“Various interviewees mentioned this as a concern. Among other things, this practice tends to drive insurers to add features (and therefore complexity) to their products – in effect an ‘arms race’.”
Ian Laughlin, the convenor of the Actuaries Institute’s Disability Insurance Task Force, pointed out that insurers offering individual disability income cover might suffer significant losses if a system overhaul does not occur.
Therefore, the industry must offer products that can be understood by customers quickly and provide more certain outcomes. They must also have prices and benefits that better meet the needs of policyholders.
Hoa Bui, the president of the Actuaries Institute, added: “The lack of sustainability of the disability insurance market is one of the most pressing issues for life insurers today. We’ve looked at the issues through a consumer lens to find a way forward for all parties.”