Effective 1st October 2023, Zurich and OnePath will be introducing new underwriting guidelines for Total and Permanent Disability (TPD) applications for personal purposes for both Zurich Wealth Protection and OnePath OneCare.
The key change is the introduction of a cap on TPD sums insured circa $3 million, where the TPD sum insured results in the customer insuring more than their future lifetime income across their TPD and Income Protection (IP) covers.
Underwriters will compare the total TPD Sum Insured and IP benefits to Income to retirement. If the TPD sum insured is over $3 million, underwriters will apply a cap if the TPD and IP cover is higher than income to retirement. Cover being applied for and cover held elsewhere will be considered.
Under the new guidelines, if the requested TPD sum insured exceeds $3 million, advisers can still quote. However, advisers will receive a notification during the process and the case will be referred to an underwriter for further evaluation.
For advice businesses, it is important that this does not distort the objectivity of risk insurance needs analysis. However, this could impact the outcomes of insurance product recommendations for clients with higher levels of debt and higher incomes. Advisers will need to factor these underwriting limits into the formulation of their advice strategies.
This new guideline will apply to applications received from 1st October 2023, except where an SOA has been prepared before this. Underwriters can accept SOAs dated pre 1st October 2023 supporting TPD sums insured higher than the new caps until the end of October 2023.
For advice businesses, this means having robust discussions with their clients about their risk mitigation needs and very clearly understanding and prioritising their clients needs and objectives in the event that they are totally and permanently disabled.
This move emphasises the importance of reviewing your practice’s or Licensee Insurance Philosophy, as well as the value of regularly reviewing your clients’ sums insured.
While we have not seen any releases from other insurers about similar underwriting guidelines being introduced, it stands to reason that other insurers could follow suit.