AIA Australia has launched TPD CORE, a redesigned total and permanent disability product that changes how eligibility is assessed for mental health, chronic pain and fatigue conditions without altering the lump-sum structure that advisers and clients are familiar with.
For physical conditions with objective clinical markers, assessment under TPD CORE is unchanged. For mental health, chronic pain and fatigue, the product sets clearer evidence requirements and weights functional impairment more heavily than diagnosis when determining whether a condition is severe, enduring and permanent. Damien Mu, AIA Australia's chief executive and managing director, framed the change as a rethink of how mental health conditions are evaluated.
"We need to rethink how we view mental health conditions, because a diagnosis is not a life sentence," he said. "TPD CORE plays an important role in our overall approach to playing a more active role in the mental health of our customers, so that we can ensure that claimants with severe, permanent and work-ending conditions are paid a lump sum, and less severe, episodic mental health issues receive other types of support."
AIA has paired TPD CORE with a five-year rate guarantee, giving advisers and clients pricing certainty over that period rather than a lower headline premium.
TPD CORE arrives twelve months into a wave of product redesign activity that has produced three distinct responses to the same regulatory and financial pressure.
APRA and ASIC data for the 12 months to December 2025 show advised income protection claims accepted at 94.4%, against 82.9% for advised TPD. That 11.5 percentage point gap is not new, but its cause has become harder to ignore. Jane Magill, APRA's executive director for life, private health insurance and superannuation, told the Actuaries Institute's 2026 All Actuaries Summit that mental health now accounts for one in three TPD claims paid, and that mental health-linked TPD claims among Australians in their 30s have climbed more than 700% over the past decade, citing CALI data.
"This is not just an increase in volume," she said. "It's a structural shift that the product's original design was never intended to accommodate."
The financial pressure behind that shift is visible in KPMG's Life Insurance Insights data, which found the ratio of claims to premium in group lump sum risk rose from 78% in 2023 to 81% in 2024 and reached 91% by June 2025, pushing the segment into a negative insurance result. AustralianSuper has already acted on the pricing side, announcing increases effective May 30, 2026 that lift TPD cover by an average of 40%, death cover by 20% and income protection by up to 38%.
AIA's TPD CORE is the third publicly launched redesign in twelve months. TAL launched its TPD Support Option in December 2025, built into Accelerated Protection. Rather than a lump sum, it pays 20% of the sum insured annually, subject to yearly reassessment, with full protection retained if the person remains unable to return to work. TAL has priced it below standard TPD, making a direct pricing argument for advisers weighing it against the traditional product.
Acenda, the rebranded MLC Life Insurance, launched TPD Severity in September 2025, assessed against the Psychiatric Impairment Rating Scale and Whole Person Impairment, with claims paid once a claimant reaches 30% or more on either measure after maximum medical improvement. Acenda structured it as a sliding scale allowing a policyholder to shift coverage between standard TPD and TPD Severity as they age without fresh medical underwriting.
The three designs are genuinely distinct. TAL replaces the lump sum with staged payments. Acenda restructures around severity thresholds. AIA retains the lump sum but changes the assessment framework for mental health and related conditions and offers rate certainty. All three treat the traditional product as something being replaced, not the benchmark to match.
Having three competing designs on the market does not resolve the problem if take-up remains low. A joint APRA-ASIC CEO roundtable held on April 15, 2026, bringing together 19 life insurers and reinsurers alongside Treasury and CALI, found industry momentum toward new TPD designs but concluded older-style products still dominate the adviser-led retail market.
Magill identified the specific mechanism: advisers and research houses tend to favour products with a track record, creating inertia against newer designs even where those designs may hold up better over time. On the group side, where most Australians hold their TPD cover, superannuation trustees control product design decisions, and some are applying a narrow reading of their Best Financial Interests Duty in ways that slow reform.
Regulators have already flagged that recommending the familiar product by default is exactly the pattern slowing the market's response to a claims problem they consider structural. AIA's five-year rate guarantee is a direct attempt to reduce the pricing uncertainty that makes advisers hesitate, without requiring them to move clients onto a product they have not yet seen perform.
Which of the three designs gains ground will depend less on what any insurer launches next and more on which of these products advisers actually start putting in front of clients.
