New Regulator Expectations Put Insurance Affordability Back in Focus

For life insurers, the timing matters. The sector is already dealing with pressure from rising mental health-related claims, sustainability concerns in total and permanent disability cover, and affordability challenges that are flowing through to members, policyholders and businesses. The Government has specifically asked APRA to bring its expertise to insurance affordability and availability, including through better data collection to inform policy decisions.

APRA’s response points to a continued risk-based approach, while also recognising the need to reduce unnecessary reporting and compliance burden. ASIC has similarly indicated it will focus its regulatory effort where risk is greatest and review whether existing guidance and instruments remain necessary and proportionate.

For business owners considering key person cover, this is not an immediate promise of lower premiums. However, it may influence the environment in which insurers design products, price risk and respond to changing claims trends. If regulatory settings give insurers more room to innovate while still protecting customers, the market may be better placed to develop cover that is both sustainable and practical for businesses.

This development also extends recent debate around TPD and mental health claims. Regulators have already highlighted that some products are under structural stress, particularly where claims experience no longer matches how cover was originally designed. The new expectations add another layer: regulators are being asked to preserve consumer protection while avoiding duplication, excessive burden and unnecessary barriers to competition.

For companies relying on founders, directors, senior salespeople, technical experts or other revenue-critical staff, the message is to stay proactive. Premiums, exclusions, waiting periods and definitions can shift as insurers respond to claims trends and regulatory signals. That makes it important to compare cover options carefully rather than assuming last year’s policy settings remain suitable.

Businesses should also consider whether the sum insured still reflects their current exposure. Replacement recruitment costs, lost revenue, debt obligations, investor confidence and continuity planning can all change quickly. Where the policy structure is complex, speaking with an adviser or broker may help clarify whether life, TPD, trauma or income-related protection is the right mix for the organisation.

The regulatory shift is best seen as a signal rather than a settled outcome. Affordability, claims fairness and product sustainability will remain live issues for the life insurance sector throughout 2026 and beyond.