Important Changes to Income Protection


The Australian Prudential Regulation Authority (APRA) has mandated changes to income protection insurance to make the industry more sustainable. Some of these changes have already come into effect, and others will commence from 1 October 2021.

  1. Insurers will no longer be able to assess claims under an ‘own occupation’ definition. Instead, they will be assessed under ‘own occupation’ for the first two years, then assessed under the ‘any occupation’ definition based on their experience, education and training. This is a huge shift by the insurers, as currently (and up until October) the insured has always been continually assessed under 'own occupation' until the expiry of the policy.
  2. Insurers must stop basing benefits on a person’s income at the time of application, and instead must use their income at the time of claim. For those with stable incomes, benefits will be based on income earned in the previous 12 months. For people with variable incomes, their past earnings will be averaged over a period of time and reflective of future earnings lost as a result of the disability.

    This could have a big impact on anyone whose income varies from year to year, such as business owners. A business owner who, for example, has more modest income for several years while they are building their business, and then a higher-income year just prior to an injury, could see their payout calculated at significantly less than they expect, as a result of averaging. 

FROM 1 October 2022 - Revised Contract Terms

Insurance policies must be limited to terms of five years. Every five years, insurance companies will be able to review an individual’s income, occupation and personal past-times (like dangerous hobbies) and then be allowed to make changes to the policies, and the premiums, before insurance is renewed. However, an individual’s health will not be in scope to be reviewed.


The good news for people with current income protection policies is that those policies are not impacted by the changes. With significant change happening soon though, it’s a good time for people without income protection to get advice.
The information provided in this newsletter does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you obtain your own professional advice before making any decision in relation to your particular requirements or circumstances. For details of Synchron (our financial services provider AFS 243313) privacy policy please visit 
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