Association of British Insurers (ABI), announces record £3.6bn paid out in protection claims to UK policyholders during 2015
Protection insurance provides a vital safety net for consumers in the event of a death, serious illness or injury. During 2015 policyholders claimed a record breaking £10m a day across all protection products helping them avoid financial difficulties that can result from a loss of an income or a loved one received.
A total of £3.6bn was paid out in 2015 across life insurance, critical illness insurance and income protection to more than 129,100 policyholders or families, with the average payout being £28,000. The ABI states that 97.2 per cent of protection claims were paid during the year. Of the 2.8 per cent of claims which were declined was due to either the claim being for a condition not covered by the policy, or the customer not disclosing important information when taking out the policy.
The average individual income protection (IP) policy pay out, which helps those unable to work due to illness or injury, lasted for 214 weeks (more than 4 years) and was worth £40,000. However, during 2015, only 91.2% of claims were paid out which still leaves room for improvement.
The average pay-out in 2015 on a critical illness (CI) insurance policy was £66,200. The percentage of CI insurance claims being paid continues to rise, with 93.1% paid (up from 80% in 2005). There has been a steady rise in the percentage of claims paid since the introduction of the ABI’s Code of Practice on non-disclosure, first issued in 2008, which clarified which medical information customers needed to share with insurers.
The average pay-out on a term life insurance policy was £53,800 with 98.2% of claims being paid. In 2015, insurers paid out more than £1.5 billion in claims.
For whole life insurance the average claim payment was £5,900 with almost all (99.99%) of claims paid. In total £389 million was paid out in 2015.
Total Permanent Disability claims tend to be very difficult to claim on and prior to the introduction of the ABI standard definition for Total Permanent Disability (TPD) in the Critical Illness Statement of Best Practice in 2011 there was no standard definition of what circumstances qualified as “total permanent disability”. This lack of clarity led to claims being made that did not qualify. The introduction of the Statement of Best Practice has meant that the share of declined claims has steadily fallen over the years; this trend will continue as all new TPD policies are tested against the industry standard set by the ABI. During 2015 claims averaged £65,200 with 66.4% of claims paid in the year, up from 64.1% the previous year, and 50% in 2009.
|Type of Product||Number of Claims||Total value paid (£000)||Average Claim Paid in (£s)|
|Received||Paid||% Paid||Declined||% Declined|
|Term Life Insurance||29,248||28,734||98.2%||514||1.8%||1,545,616||53,790|
|Total Permanent Disability||875||581||66.4%||294||33.6%||37,889||65,213|
|Whole of Life||65,672||65,664||99.9%||8||0.01%||389,080||5,925|
|Individual Income Protection1||14,664||13,372||91.2%||1,292||8.8%||131,026||9,799*|
*Individual Income Protection policies may pay out for a few months or for many years. This figure is an average of all new and on-going claims during 2015.
Yvonne Braun, ABI Director of Policy, Long-term Savings and Protection, said: “Insurance can help to relieve the financial strain on families following a death, serious illness or injury. Every single day, insurers pay out nearly £10m to support families through difficult times. Insurers want to make it as simple and easy as possible for people to claim, and it’s great to see that 97% of these claims are paid.
“Protection insurance does not just help relieve financial distress, it also provides vital practical support. For instance, income protection supports people with rehabilitation services and back to work support when they have to leave work because of illness or injury.
Braun concluded: “Serious illness or injury can have a massive impact on people, financially as well as personally. Products such as income protection, life insurance and critical illness cover improve people’s financial resilience, safeguard their financial future and provide peace of mind.”