Making safe and effective COVID-19 vaccines available to all Australians is a key priority of the Australian, State and Territory governments. But what does this mean to expats staying in Australia?
The Australian COVID-19 Vaccination Policy (Policy) outlines the approach to providing COVID-19 vaccines in Australia. It sets out key principles, such as that COVID-19 vaccines will be made available for free to all Australian citizens, permanent residents, and most visa-holders. Further, it outlines how COVID-19 vaccines will be accessible on a rolling basis, dependent on vaccine delivery schedules and the identification of groups for most urgent vaccination.
Who is covered by this policy?
The COVID-19 vaccination will be free for all Medicare-eligible Australians and all visa-holders excluding the following:
- excluding visa sub-classes 771 (Transit)
- 600 (Tourist stream)
- 651 (eVisitor)
- 601 (Electronic Travel Authority).
In terms of preliminary priority population groups, the Australian Technical Advisory Group on Immunisation (ATAGI) identified the top three priority for the vaccination which are:
- Those who are at increased risk of exposure and hence being infected with and transmitting SARS-CoV-2 to others at risk of severe disease or are in a setting with high transmission potential. This includes health and aged care workers; other care workers, including disability support workers; and people in other settings where the risk of virus transmission is increased, which may include quarantine workers.
- Those who have an increased risk, relative to others, of developing severe disease or outcomes from COVID-19 including Aboriginal and Torres Strait Islander people, older people and people with underlying select medical conditions.
- Those working in services critical to societal functioning including select essential services personnel and other key occupations required for societal functioning.
For further information about the Australian COVID-19 Vaccination Policy, you may download the Australian Government Policy here.
Income protection has been available in Australia for over 30 years and grown into a multi-billion dollar industry. Over time, due to the competitive nature of the industry, the features and benefits of income protection policies have grown to a point where claims paid are consistently exceeding premiums received making the industry unsustainable. In fact, income protection departments of Australian Life Insurers have lost approximately 4.3 billion dollars over the last 5 years.
The Australian and Prudential Regulatory Authority (APRA) has stepped in to address the situation and regulate the market to ensure it is sustainable. The measures imposed by APRA will significantly affect income protection policies entered into after the 1st of October 2021.
Importantly, there is no requirement for legislation to pass to implement these changes. APRA already has the power to impose them. APRA has confirmed the start date of 1 October 2021for the specific changes to be implemented.
What are the changes to income protection policies in Australia?
By the 1st of October 2021, Life Insurers in Australia will offer significantly less generous income protection policies to consumers.
The key changes are:
1. The discontinuing of agreed value policies. (effective 31 March 2020)
Previously, consumers could lock away an agreed value of the monthly benefit paid at the signing of the policy. If the policyholder’s income changed down the track, they would still receive the agreed amount even though their income may have decreased. Moving forward, the monthly benefit will be based on the policyholder’s actual income at the time of claim (or, for some insurers, the best year of earnings in any three years prior) as an agreed value is no longer available.
2. They are ceasing the ability to offer guaranteed renewable policies for the life of the policy with a maximum contract period of 5 years.
From 1 October 2021, Income Protection Policies can only be for a maximum of 5 years. After the 5 year period, a new policy must be entered into that reflects the current market terms and conditions. If a policyholder enters a new contract after the initial 5 years, medical underwriting is not required but any changes to the policyholder’s occupation, financial circumstances and dangerous occupations or pursuits or pastimes must be updated and reflected in the new policy. Insurers are also unable to extend a current policy even if the circumstances are the same. A new policy agreement must be entered into.
3. Limitation on the income replacement ratio available.
APRA is concerned that current excessive income replacement ratios and certain product features and benefits (particularly partial disability benefit formulas) can leave claimants in a better position financially than if they returned to full time work. Not only does this undermine the incentive for the person to return to full time work, but it may also lead to the individual paying additional premiums for cover that isn’t required.
Some examples of these policy terms and product features include:
- excessive indexation of the income level covered
- non-offset of income received from continued work, and
- additional non-income related benefits, such as rehabilitation benefits and transportation benefits.
APRA has announced changes to policy contract terms which mean that from 1 October 2021:
- benefits are capped at 90% of earnings at the time of claim for six months, and 70% after the 6 month period.
- indexation at the level of CPI is permitted.
- where income at risk excludes superannuation, SGC can be paid in addition to the 90%/70% cap otherwise the cap applies to income inclusive of SGC super.
- there is no cap on monthly benefits.
4. Limiting the way in which ‘income at the time of claim’ is defined
Previously, for agreed value policies, the monthly benefit was based on the agreed value at the time of policy commencement. Moving forward, income at the time of claim will be based on your actual earnings, not agreed earnings.
For policyholders with stable incomes, pre-disability income is to be based upon income at risk at the time of claim or within the last 12 months. For those with variable incomes, income risk is to be based on average annual earnings over a period of time appropriate for the occupation of the policyholder and reflective of future earnings lost as a result of the disability. It seems that the flexibility would cover people on maternity or unpaid parental leave.
5. The risk associated with long-term benefit periods (such as to age 65) is effectively managed and controlled by insurers.
For policies with long benefit periods, APRA requires stricter disability definitions. Previously, this was defined as being unable to perform your ‘normal job’. The expectation from 1 October 2021is that a more explicit definition of disability is established as some policyholders may be able to return to employment even though it may not come under the definition of your ‘normal job’. APRA aims to reduce the number of claimants who may be able to return to some paid employment but are not as they qualify for a monthly benefit under their agreed policy. This also presents some concern that policyholders could be forced to return to work before they are ready under stricter disability definitions.
What does this mean for existing and prospective policyholders?
Existing Policyholders are not impacted by these changes. The terms of their current policies will stay as agreed at the signing of the policy.
Prospective Policyholders should consider putting income protection in place prior to 1 October 2021 to ensure their policy falls under the current (more generous) arrangements.
As a result of these changes, we recommend that anyone considering putting income protection insurance in place consider getting appropriate cover sooner rather than later. The key benefits include:
- Protection of your most valuable asset, your ability to earn an income.
- Income protection cover is tax-deductible, which will effectively reduce the total cost of protection.
- Your policy can also provide benefits if you are injured and unable to work for short periods providing upfront payments for injuries such as broken bones or if you are diagnosed with a disease or cancer.