Australia’s two primary financial regulators have received formal government directives to reorient their supervisory approach toward economic growth, innovation, and reduced compliance burden – instructions that arrive as the life insurance sector confronts a mental health claims surge that is straining product sustainability and pushing premiums higher for millions of policyholders.
Treasurer Jim Chalmers released updated Statements of Expectations for the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) on July 16, 2026, the first such update since 2021. “This is all about enabling our financial regulators to unlock more productivity and more growth in our economy. These statements will ensure our financial regulators can help support productivity, unlock investment, and grow our economy while preserving financial stability and market integrity and protecting consumers from harm,” Chalmers said.
The statements are the government’s formal mechanism for directing how each regulator will carry out its functions. They do not override either regulator’s statutory independence but establish the policy framework within which supervisory priorities are expected to be set – and both regulators have now responded with public Statements of Intent outlining how they will implement the directions.
The directives are specific. For APRA, the government expects the regulator to support strong, sustainable economic growth through its approach to regulation and to facilitate the flow of finance in a way that promotes dynamism, innovation, and competition without compromising prudential objectives. Directly relevant to life insurers, APRA is also expected to promote a viable, competitive, and innovative insurance industry and to bring expertise to bear on insurance affordability and availability – including through the collection of insurer data to support data-informed government decisions.
On compliance burden, the government instructs APRA to minimise the costs and burdens of regulatory requirements for regulated entities, including by applying proportionate requirements, streamlining data collection, considering different business models, and taking a principles-based approach to regulation, ultimately to benefit consumers. For ASIC, the statement requires the regulator to support strong, sustainable economic growth through its approach to regulation and to consider the regulatory impact of its activities on affected industries – especially on small businesses and market entrants – ensuring its actions are proportionate and promote the advancement of consumer interests via competition, growth, and economic dynamism.
Chalmers described the move as part of a broader productivity agenda. “We’re making it clear through these Statements of Expectations that we expect the regulators to support growth and productivity through proportionate, risk-based regulation while continuing to promote financial stability, consumer protection, and market integrity,” he said.
Both APRA and ASIC responded with Statements of Intent, published alongside the government’s directives. APRA committed to maintaining a risk-based and proportionate prudential framework, balancing its primary safety and stability objectives with efficiency and competition considerations; tailoring regulatory and supervisory oversight to the specific risks and needs of different sectors, business models, or regulated entities; collaborating and sharing information with other regulators; streamlining information and data requests; simplifying processes; and addressing any inconsistencies or duplication. APRA also committed to publishing key performance indicators that demonstrate how it is minimising undue burden for industry and to maintaining a regular and transparent review program for prudential standards.
ASIC’s Statement of Intent commits to adopting a proportionate and risk-based approach that seeks to support efficiency, growth, and innovation in the parts of the Australian economy it regulates, focusing regulatory efforts where risks are greatest while actively minimising unnecessary burdens on industry. ASIC also committed to demonstrating regulatory flexibility through targeted adjustments to its regulatory posture and to maintaining a regular and transparent review program for regulatory guidance and legislative instruments to ensure they remain necessary, proportionate, and aligned with good consumer, investor, and market outcomes.
Both regulators will be required to report publicly against these commitments through their Annual Performance Statements and Corporate Plans, creating a formal accountability mechanism that did not exist under the previous iteration of the statements.
The Council of Australian Life Insurers (CALI), which represents all life insurers and reinsurers in Australia, said the statements aligned with the industry’s position that effective oversight should not impede competition or product development. CALI CEO Christine Cupitt framed the direction as a call for regulatory rationalisation rather than a reduction in consumer protection. “Strong, effective regulation protects Australians and gives them confidence that their life insurer will be there when they need it most. At the same time, better regulation doesn’t mean more regulation. It means making pragmatic choices that support customer protections, while simplifying or removing rules that are outdated or duplicated,” Cupitt said.
Cupitt also linked the regulatory environment directly to the industry’s capacity to respond to its most pressing operational challenge. “A regulatory environment that supports innovation and competition will give Australians greater choice and help ensure life insurance remains affordable and accessible. These settings are especially important as our industry looks to provide affordable and sustainable cover that responds to the challenge of rising mental ill-health in the community,” she said.
The regulatory shift arrives as the industry faces a structural problem that proportionality and streamlined standards alone cannot resolve. CALI has reported that in 2024, insurers paid out more than $2.2 billion in mental health claims – almost double the amount paid five years earlier. Mental health now accounts for one in three TPD claims paid, and among Australians in their 30s, the rate of TPD claims linked to mental health has risen by more than 700% over the past decade. That trajectory is reaching policyholders directly. From June 2026, approximately 1.7 million AustralianSuper members faced higher insurance costs, with the fund citing a surge in mental health and disability claims – particularly among younger members unable to return to work. TPD cover rose by an average of 40%, death cover by an average of 20%, and two-year income protection premiums by 38%.
According to KPMG’s Life Insurance Insights report, covering results to June 30, 2025, group and individual lump sum products saw a decline in profits during the 2025 financial year, with losses in the group lump sum segment influenced by an increase in adverse TPD experience and higher levels of mental health-related claims. Life insurers reported a combined after-tax profit from continuing operations of $121 million for the March 2026 quarter – a decline from $293 million in December 2025 and less than half the $332 million posted in March 2025.
APRA has characterised TPD as a product misaligned with its current claims profile. Speaking at the 2026 All Actuaries Summit, APRA executive director for life, private health insurance, and superannuation Jane Magill said TPD faces a sustainability problem it cannot solve through technical adjustments alone, identifying mental health as a claim type the product was never structured to handle at scale. Magill outlined three interlocking failures: how claims are managed, how the product is designed, and whether the parties that control it are aligned on the need for change.
“TPD is now being asked to solve an issue it was never built to address. Progress now requires more than technical skill. It calls for a change in perspective, creativity, agility, and coordination across disciplines,” Magill said. Her remarks drew on two pieces of regulatory work: a thematic review of insurance risk management practices across the industry and a CEO roundtable jointly convened by APRA and ASIC – both of which pointed to the same fault lines in claims management capability and product design. APRA’s Statement of Intent specifically commits to bringing expertise to bear on insurance availability and affordability, including collection of data to support data-informed decisions – language that aligns directly with the government’s own expectation that APRA will use insurer data to inform policy decisions on the same issues.
Whether the government’s growth-oriented directives create regulatory space for meaningful product redesign – or whether structural reform of TPD ultimately requires legislative action – is now among the most consequential questions sitting with both regulators as they translate their public commitments into supervisory practice.
