The life insurance industry is set for major changes in 2025, driven by new regulations, evolving customer needs, and technological advancements. The Financial Accountability Regime (FAR) and the review of the Life Insurance Code of Practice will drive greater transparency and improved consumer protections across the sector. At the same time, an exponential rise in mental health claims and a rapidly ageing population will demand greater intervention and attention from life insurance providers that have, at least in the past, typically stood at a distance from their members.

Insurers must also adapt to changing consumer habits and expectations, with digital-first experiences and personalised coverage fast becoming the norm, while emerging technologies like artificial intelligence (AI) reshape underwriting and claims processes as well as the provision of advice.

In the lead-up to our Future of Insurance 2025 next month, we sat down with featured keynote speaker Keely O’Brien, General Manager of Corporate Affairs and Strategy at the Council of Australian Life Insurers (CALI), to discuss the peak body’s pivotal role in shaping the future of life insurance. O’Brien explores key pressure points facing life providers, including the rise in mental health claims, as well as regulatory changes and consumer-focused challenges shaping the sector.

FST Media: Since its founding in 2022, the Council of Australian Life Insurers (CALI) has played a central role in representing and shaping the life insurance sector in Australia. Can you share some of CALI’s most significant achievements so far and how the organisation is influencing the future of the industry?

O’Brien: Our first decisive achievement was setting up an organisation from scratch, making us a fully functioning industry association. We’ve only been in existence for two years, so we’ve had to put together a whole team and a whole structure to support our members in place.

In terms of tangible outcomes, the work that we’ve done with the government on advice reform, particularly around life insurers being able to provide financial advice, is something that we are extremely proud of. Of course, we’re still waiting for draft legislation, and we need it to pass.

But if I reflect on when I first started at CALI two years ago, and the conversations I had with Stephen Jones, the current financial services minister, that starting place versus where we’ve ended up is very different.

And that I would say is solely attributable to CALI’s work in advocacy and being able to explain the role that our members want to play, how we fit in the ecosystem and work alongside financial advisers. We’re not working against them.

The other call out is that we’re doing a lot of work around mental health. At the end of last year, we started to look at the data that we have as an industry, through our unique perspective, to understand what’s happening with Australia’s and Australians’ mental health. And we’re seeing very concerning trends around people leaving the workforce earlier.

FST Media: Does CALI’s unique industry-wide view help you uncover emerging trends in the life insurance sector?

O’Brien: We have a unique position for people who come to us when they’re at the end of the line. So, typically, people would make claims for a particularly challenging circumstance: either they (or their family members) have passed away or they’re leaving the workforce because they’re totally and permanently disabled, or they’re claiming on income protection or a trauma claim because they’re unable to work. It’s all related to that.

People normally come to an insurer when they realise they’re at a point where they’re unable to work anymore in any capacity. It’s truly people at their endpoint. Why I think it’s so important for all members of our community to appreciate this is that an increasing number of individuals are reaching this point at an ever-younger age. We’re concerned about the effect on people’s everyday mental health and wellbeing.

What we can do is identify where problems occur earlier in the claims process and help inform our members of decisions and solutions. So, we as CALI talk to mental health advocates, researchers and government as well to do more work in this space. We’re starting to think about what we can do from a research perspective and any changes we should make as insurers to support our customers to ensure that they’re living their best, happiest, healthiest lives.

FST Media: From your perspective, what are the key trends, challenges and opportunities facing the industry in 2025, and how should insurers prepare for them?

O’Brien: The two key things are probably financial advice and mental health. It really comes back to those. For insurers, in both these areas, technology can play a really important role in getting to know their customers, to understand their circumstances, and to be able to simplify processes to support their needs more quickly. With advice, there’s a whole range of things that could be done in terms of digital advice or making sure that they have the right tools in place to have a really solid conversation the first time a customer calls and asks for help.

As for mental health, I see an enormous opportunity to leverage technology for the purposes of knowing the customer, particularly on the claims management side.

When you think of the day-to-day job of a claims manager, they have a whole range of claims that they have to look at, files and files of notes. There are so many developments with technologies like AI and digital solutions that simplify that so they can see a customer holistically and be able to have a conversation with them without having to rifle through notes or search through files. It just pops up one day and says, ‘Today, Keely’s been off because she hurt her back. But the last three times she’s spoken to the doctor, she’s talked about how she’s actually feeling really depressed and she’s being treated for that’. Now, the insurer knows it’s the right time to have a conversation about different support that could be offered through a range of health management programs, access to psychologists, or other ways to help support her return to work.

FST Media: Given the broad and varied nature of the life insurance industry in Australia, are there strategies or tools that can and should be applied universally, or is it more about finding a tailored solution for each challenge?

O’Brien: It’s a competitive market, so people and organisations have different priorities. And all of our members, no doubt, have different priorities in terms of the services and solutions they need.

But I think holistically across the industry, we’ve identified a genuine need for better data collection practices.

The work that we did last year examining the last 10 years of retail claims was a great first step, but the majority of people in Australia are covered through their superannuation. We would like to start looking at what the claims experience is like within superannuation, and to truly understand what we can do that at an industry-wide level.

FSTMedia: Just following up on your previous point on mental health, a recent CALI-commissioned report highlighted a worrying surge in mental health claims, with statistics showing young Australians leaving the workforce in droves. What factors do you believe are driving this trend, and how is it impacting the life and wider insurance sector?

O’Brien: The ripple effect is incredibly concerning. What our data shows is that the frequency and severity of mental health in our community are rising exponentially. I can safely say that nobody wants that to be their experience, that they become so mentally unwell that they’re unable to work while in their 30s. That’s many, many years of working life you’re giving up and missing out on your greatest asset – your income.

In terms of what’s causing this epidemic, that’s where conversations with mental health advocates and researchers come in. There is a whole range of views regarding why younger Australians are becoming severely mentally unwell at a much younger age. But we’re also now seeing that rubber hit the road with regard to individuals coming and saying they’re critically unwell.

FST Media: Based on the data collected, is this a long-term trend in declining mental health that we’re seeing, or do you think it’s something the industry can address before it becomes a widespread issue?

O’Brien: It’s an industry-wide problem right now. We do an annual data collection as an industry that looks at what we call the ‘claims experience’. This is just on retail and on products that people access either via financial advisers or directly from an insurer, not through superannuation.

The report that we put out last year looked at the exponential rise and the 732 per cent increase for people in their 30s claiming TPD [Total and Permanent Disability] over the last 10 years.

What we see is that there’s definitely something that has changed in the last decade. If we begin to consider projections going forward, what does that look like in the next 10 years? It doesn’t look good.

FST Media: You’ve mentioned the potential for technology to aid in this mental health space. Do you see it as a long-term solution or more of a stopgap measure until the industry can undergo a broader overhaul?

O’Brien: There’s that saying about eating the elephant one bite at a time. Australia’s mental health crisis is something that there’s no easy solution for.

The statistic now is that one in three Australians will experience a mental health condition in their lifetime, and the implications of that, in terms of the type of cover that one needs and what you can and can’t make claims for, are worth talking about. Certainly, as an industry, it’s something that we will be working on over the next few years.

It’s a real focus for us in considering how we best serve our customers. If we know that a very large portion of individuals are going to make mental health claims, what is the right balance and outcome there? There are also competitive market decisions that insurers can make in terms of their product design (though product design is not something that we as an industry association can be involved in). So, individual insurers may make decisions about their own product designs based on all the information they’re getting.

The government plays probably the biggest role here in making sure that people have access to the right support.

As I said, we’re really at the endpoint at CALI. The reason why more people are potentially getting to that point is because they’re not getting enough help along that process as it comes down.

Unfortunately, we’ve also seen a trend over the last 10 years of people moving from income protection and then onto total and permanent disability claims rather than returning to work. That is normally where, for other conditions, insurers can provide rehab support for people to return to work. There’s lots of wraparound and support from an insurer when you make a claim to try to help return you to wellness and make sure that you are healthy, because that’s the best outcome for both customers and insurers.

But with that trend of people moving from income protection to total and permanent disability, we can see that mental health rehabilitation isn’t happening. That may be because they’re coming to insurers too late in the process and they’re not getting support earlier on. And that’s where I see us being really aligned with mental health advocates and researchers – that need for significant investment to ensure that Australians not just have adequate but really solid and strong access to the right supports and intervention as early as possible, so they don’t become critically unwell.

FST Media: In a world of increasing technological complexity and tech debt, compliance has become ever more challenging for financial services businesses. In this environment, how is CALI supporting its members in remaining competitive and compliant?

O’Brien: That’s a big one. In terms of the role that CALI plays as an industry association, I use the metaphor of a football field: our job is to mark out the lines on the field. All our members are different teams, and they come on and play; CALI’s job is to make sure that the field is there, that the lines and the lights are on the field, and they have a nice even pitch to play on. But how they turn up and play, the jerseys that they’re wearing, the plays they run are all up to them.

So, what does the field look like to me? Well, it’s about making sure we have the right laws and regulatory settings in place to protect customers, who are our most important priority.

We also have a role in nurturing a thriving, competitive life insurance industry in Australia. You need to have that right balance of adequate consumer protections and red tape (or the removal of) to ensure that you can have a thriving industry.

Advice reform is a perfect example where, for various reasons, it was rolled right back. We’ve been on a journey with government to get it to a much better place; previously, customers were so protected they were actually getting really poor service outcomes. Now it’s our job as an industry body to explain and to show the impact on customers, and to really explain how the laws need to be changed in order to have better customer outcomes. This obviously also helps our insurers and financial advisers because they can have conversations with people and help advise on their products.

FST Media: With a slew of new regulations set to be enacted this year, compliance will likely prove a greater challenge than usual for your members. How can insurers adapt to these changes while remaining competitive in the market?

O’Brien: A really critical thing for us is to ensure we have the right balance in the industry through the Life Code of Practice (which we are currently in the process of reviewing). That’s essentially our own industry regulation; it is the guiding document providing the detail of how insurers need to act, rather than laws or regulations. The feedback we’ve received from our members is that having the Life Code makes it far easier to plan all their business processes and procedures.

For us at CALI, our job is to ensure we have a modern and responsive code, but not one that changes every five minutes. That would be a huge compliance burden for our members.

Our role is to have those conversations with regulators and with government to explain the burden and to ask, ‘How can we streamline it? What is it that you’re really trying to achieve? How can we do that without having too much of a burden and impact on operations for insurers?’ They are very open to those conversations and aware of these concerns. Over the last two years, regulatory changes have slowed down compared to how it was prior to the formation of CALI, which is probably a reflection of where things are at in terms of cycle and the way the industry works a lot more closely with regulators.

For insurers, it’s about making sure that when they are building their own systems and processes, they’re removing complexity within their systems, and for instance using fewer systems: so, where possible, you only need to press one button, not 20. But each business makes its own decisions about their digital transformations and what suits their needs. The impact of a regulatory change varies depending on who you are and how your backend systems are set up.

FST Media: With the rapid adoption of AI in life insurance, how can insurers balance the race to innovate with the need for clear regulations and customer protection?

O’Brien: I know the regulators and individual insurers are looking at this and they’re all having conversations with one another. As the Life Code begins the review process this year, there’s potential, depending on submissions about what people want it to look like, for that to be covered, or for it to be covered by work that the government and regulators are doing.

I’d be inclined to think that the AI side of things will be related to regulatory guidelines.

FST Media: You will be joining us at our upcoming Future of Insurance, Sydney in March. What do you hope to share with and hear from your fellow industry leaders?

O’Brien: For me, insurers have a unique role in helping people at some of the hardest and most difficult times in their lives. We’re thinking about, how we use technology to make that experience the best it can possibly be, creating a seamless quick experience, where if it’s digitised, the human effort is put into being empathetic and supporting someone who’s going through something traumatic and difficult in their lives. Here is where I’m most excited about the confluence of technology and insurance. It’s about simplifying processes, taking all the work out of helping the customer so that you’re able to invest time and energy in being there and holding their hand in those difficult moments – whether that’s helping them into rehabilitation services, counselling or grief counselling services.

In an ideal world, insurers would focus solely on providing care, support, and empathy, while technology handles those more routine tasks and processes. That’s a great outcome for both customers and insurers because we want consumers to have a positive experience, and that we as an industry are supporting them in those difficult times. Here is where I’m keen to hear solutions and buzz in the industry.

And there’s a lot of great stuff happening in the back office. Insurance is a bit like banking was 10 to 15 years ago in terms of their backend technologies and front-end platforms. Companies and individuals are at varying points of their journey, but there are great stories of businesses realising their wins from digital transformation. They know their customers and they’re having those really genuine, authentic and meaningful conversations with them without reading a million forms in the background. These are the stories I’d really like to hear more about!