1. Why has Income Insurance changed?
APRA requires all Individual Disability Income Insurance policies be reviewed with product design features implemented where there is:
- Requirement to significantly improve sustainability
- An increased focus on return to work. This is being addressed through reduced income replacement ratios combined with greater emphasis on rehabilitation and retraining initiatives
- Enhanced product controls for long term benefit periods; and
- Mechanism to update product terms.
Integrity has always acted in a way that ensures the long-term sustainability of our products, our business and our industry.
2. What are the key differences between the October 1 Income Insurance product, and your previous one?
We have designed our product to have as much flexibility as possible so that Advisers can tailor it to suit the specific needs of their clients.
Income Insurance
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Pre-October
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Post-October
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Total Disability and Partial Disability Definitions
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Multi-tier definition.
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One definition.
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Income Replacement Ratio (IRR)
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75%
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A choice of IRRs being 70% IRR, 60% IRR and 50% IRR + an option to ‘Top Up’ the Total Disability where the 50% IRR or 60% IRR are chosen.
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Choice of Features
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Built-in features such as CPI Rate Increase and Claims Indexation.
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Ability to customise cover to the needs of clients with three costed options, being the Claim Benefit Indexation option, Super Contribution Cover option and Total Disability Top Up option.
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3. What are your Total Disability and Partial Disability Definitions? Why have the Totally Disability and Partial Disability definitions changed?
Integrity Life has always been committed to supporting rehabilitation and retraining. Our new definitions support claimants on their return-to-work journey and offer greater certainty on how they may meet the definition of Total Disability or Partial Disability.
For the first 24 months of a claim, we will assess Total Disability as inability of the Life Insured to perform their Occupation. Beyond the first 24 months of a claim, Total Disability is assessed as the Life Insured’s inability to undertake Suitable Work which they are reasonably suited by way of education, training or experience.
Total Disability within the initial 24 months of Total Disability, solely as result of a sickness or injury, the Life Insured is:
- not working in their Occupation and does not have Work Capacity to undertake Suitable Work; and
- under the regular care and following the advice of a Medical Practitioner in relation to the sickness or injury causing Total Disability; and
- meeting the requirements of their Recovery Management Plan.
Total Disability where the Life Insured has been Totally disabled for 24 months or more, Total Disability solely as result of a sickness or injury, the Life Insured is:
- not working in their Occupation or in any other occupation for which they are reasonably suited by way of education, training or experience, and they do not have the Work Capacity to undertake Suitable Work; and
- under the regular care and following the advice of a Medical Practitioner in relation to the sickness or injury causing Total Disability; and
- meeting the requirements of their Recovery Management Plan.
Partial Disability Solely due to sickness or injury the Life Insured is:
- not working to their full work capacity in Suitable Work; and
- working to full Work Capacity for less than 32 hours per week in Suitable Work; and
- earning Monthly Earnings of less than 80% of their Pre-Disability Income; and
- under the regular care and following the advice of a Medical Practitioner in relation to the sickness or injury which caused Partial Disability;
- is no longer able to earn their Pre-Disability Income solely as a result of a sickness or injury; and
- meeting the requirements of their Recovery Management Plan.
Suitable Work at claim inception relates to the claimant’s regular occupation prior to disablement.
If you are not working to your full Work Capacity, partial disablement is determined based on your Work Capacity assessed by us.
4. How will income be assessed?
Income will be assessed based on three components: Earned Income, Passive Income and Unaffected Business Income. For the definition of each of these components, refer to Integrity’s Here for You PDS.
In the event of a claim, we’ll take the average Monthly Earnings for the 12 months immediately prior to the date the insured became ill or injured. However, if the insured’s income is subject to material monthly or seasonal variation and has varied by 20% or more in the 36 months prior to becoming ill or injured, we’ll take the average Monthly Earnings for the 36 months.
5. What are the key benefits of the Integrity product?
In designing our 1 October Income Insurance product, we consulted with Advisers and Licensees as part of our ‘Listen, Learn, Act’ framework and the key element they asked for was flexibility in the product design. As such, our 1 October Income Insurance product offers choice across Income Replacement Ratio, Waiting Period, and Payment Period. This allows Advisers to customise the product so that provides for their client’s best interests.
The product also provides the option of a Total Disability Top Up option which is available with selected Income Replacement Ratios (50% and 60% IRRs). When selected, we will increase the Total Disability monthly benefit for a maximum of six months for any one claim.
In addition to this, from 6 September 2021, we have removed premium loadings for policies paid monthly. These range from around 7-8% in additional premium loading across the industry.
6. Where a 1 year or 2 year Waiting Period is chosen, why does Integrity Life require cover to be in place with an equivalent benefit period?
Where a client chooses a 1- or 2-year Waiting Period, we now require them to have an income protection policy in place with Integrity or another insurer with a benefit period equivalent to the chosen Waiting Period. This requirement ensures that should they lodge a claim, the client has been undergoing rehabilitation, retraining and other return-to-work initiatives during the timeframe.
7. Why is the Superannuation Contribution Cover now capped at 10%?
Our Income Insurance design seeks to ensure the claim benefit paid does not exceed the financial loss suffered. In the case of superannuation, this meant aligning the maximum insurable amount with the government-mandated amount of superannuation contribution. The superannuation guarantee is currently 10%.
8. Why does the Top Up apply to Total Disability and not Partial Disability?
The Top-Up option is designed to top up the Total Disability benefit in the initial 6 months where a claim is being paid for Total Disability, as there is an increased level of costs associated with the Total Disability. The Total Disability Top Up option will not be payable where a claimant is Partially Disabled as they will continue to receive an income.
9. How does the Total Disability monthly Top Up option work?
If a customer selects the Total Disability monthly Top Up option and becomes Totally Disabled, during the first 6 months of claim, the monthly benefit will be “topped up” in accordance with their selected IRR as follows:
| IRR |
Top-up amount |
| 70% |
Not available. |
| 60% |
- The monthly benefit will increase by 16.67% subject to a maximum Income Replacement Ratio of 70%.
- Where the IRR 60% has been chosen and the Total Disability monthly benefit payable in a month is $6,000 (from Pre-Disability Income of $10,000 per month), the Total Disability Top Up benefit would be $1,000 – so it tops up the total benefit payable in that month to $7,000.
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| 50% |
- The monthly benefit will increase by 20% subject to a maximum Income Replacement Ratio of 60%.
- For example, where the IRR 50% has been chosen and the Total Disability monthly benefit payable in a month is $5,000 (from Pre-Disability Income of $10,000 per month), the Total Disability Top Up benefit would be $1,000 – so it tops up the total benefit payable in that month to $6,000.
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10. After October 1, 2021, can someone with an existing Income Insurance product change to the new Income Insurance product without the need for underwriting?
Yes, providing there is no increase in risk – meaning the Payment Period, Waiting Period or Cover Amount do not increase at the time the change occurs. We will require confirmation of income at the time of the change is requested.
11. Are there any new considerations to the role of Total and Permanent Disability Cover and Critical Illness Cover in light of the new Income Insurance product?
The changes to Income Insurance cover in many ways help clarify the role of the various cover types. For example, Income Insurance is a temporary measure to help clients keep their households ‘running’ while ill or injured and unable to work (eg: ensuring bills are paid and day to day expenses are taken care of). On the other hand, the lump sum covers are designed to support clients adjusting to a new normal and cover material, and unexpected medical costs.
To support Advisers in meeting the needs of their clients, we have created this short article on “Income Insurance product structuring with lump sum cover post October 1.”
12. How does Integrity support clients in returning to work?
Our Claims teamwork with claimants and their Medical Practitioners to create personalised Recovery Management Plans, drawing from the expertise and skills of third-party rehabilitation providers. We help get someone on claim back to work through connecting them with the right rehabilitation and recovery support. You can read more about our Claims Philosophy here “Return to work, return to wellness”.
13. If a client needs to make a claim, what do I need to know about the new product to assist them?
Our Claims Philosophy and approach has not changed with the introduction of the new Income Insurance product. Our Claims team continue to approach claims with a customer-centric mindset, working with claimants and rehabilitation and retraining providers to reach the best outcome, appropriate to their conditions and needs. You can read more about our approach to claims here or for information on how to submit a claim you can check out our Adviser Guide.
14. Will Integrity Life’s approach to rehabilitation and retraining change?
No. Integrity has always been committed to supporting rehabilitation and retraining and we continue to help claimants on their return-to-work journey. We will work with the life insured, their medical practitioner and rehabilitation providers to jointly agree on a Recovery Management Plan to assist the life insured in returning to work.
15. What are the transition rules and dates?
For current Income Insurance products (pre-1 October):
- Apps must be submitted by 30 September 2021.
- Submitted apps have until 28 February 2022 to be placed In Force.
Post 1 October 2021: All inflight quotes and apps (not submitted) will be subject to the Income Insurance product available from 1 October 2021.
16. What will happen to my existing Income Insurance policy and what changes can I make?
In permitting changes to be made to Income Insurance Cover which was applied for prior to 1 October 2021, Integrity will follow guidance provided to insurers by APRA.
For policies applied for prior to 1 October 2021 which include Agreed Value or Indemnity Income Insurance Cover, the following changes are permitted from 1 October 2021:
- Decreases to Cover.
- Increases where underwriting is required;
- CPI Rate increases;
- Easy Increases for Life Events where Underwriting is required;
- Changes to Premium, such as moving from Level Premium to Stepped and Stepped Premium to Level;
- Change of ownership; and
- Splitting Income Insurance.
Integrity may also reissue an Agreed Value, Indemnity 12 months and Indemnity 3 years contract which was issued prior to 1 October 2021 for administrative reasons.
The changes listed are permitted as at 28 September 2021, per guidance from APRA.
17. Have there been any other changes to Integrity’s Here for You?
Yes! From 1 October 2021, clients will be able to purchase stand-alone TPD Cover inside superannuation, meaning the superannuation Trustee is the owner of the TPD Cover policy, and the TPD Cover does not need to be purchased with any other Cover type.
Also, where a policy is held within super through Integrity’s Here for You Super Plan, your clients will have the option to pay their premium through annual contributions, complementing the existing payment methods of monthly contributions and annual rollovers.
18. Have there been any changes to Medical Definitions?
No. Our medical definitions were reviewed and updated in April 2021.
19. Why has Duty of Disclosure changed to ‘Duty to take reasonable care’?
For all consumer insurance contracts, the ‘Duty of Disclosure” has been replaced by the ‘Duty to take reasonable care not to make a misrepresentation’. This effectively shifts the onus onto the insurer to ask for all the information required to assess whether they will insure a risk and if so, at what price.
20. How does the exclusion relating to a client being disqualified or deregistered from their usual Occupation operate?
We won’t pay a benefit where a person has been disqualified or restricted from performing the duties of their usual Occupation by their relevant professional association or a government body due to their conduct.
If the disqualification or deregistration is because of illness or injury, then a benefit may be payable.
21. How do you assess passive income?
All income earned is assessed in determining the monthly benefit, with total annual income used to determine the appropriate income bracket for the relevant IRR.
Where Passive Income exists, the net amount is added to earned income to derive total annual income, then subtracted to obtain Pre-Disability Income and the monthly benefit.
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Example 1 – 60% IRR
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Example 2 – 60% IRR
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Annual income
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$150,000
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$150,000
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Passive Income (PI)
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$0.00
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$50,000
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Total annual income
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$150,000
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$200,000
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Annual benefit as per relevant bracket
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$90,000
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$120,000
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Less Passive Income
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$0,000
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$50,000
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Total PDI
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$90,000
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$70,000
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Monthly benefit
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$7,500
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$5,833
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Effective IRR
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60%
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47%
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