Just 3 per cent of protection claims rejected

In 2013, 97 per cent of all protection claims were paid out, according to data from the Association of British Insurers (ABI).

Insurance companies paid out £2m more every day in 2013 than in 2012 - the 2013 figures showed a total of £3.1bn was paid out. Every day in 2013, the insurance industry paid out £8.4m in individual life, critical illness and income protection claims.

The ABI attributes the increase to the instigation of its Code of Practice on non-disclosure, which has led to greater public awareness of what information they are obliged to share.

Helen White, head of protection at the ABI said, “It is encouraging to see this has resulted in a continuing fall in the percentage of claims that are declined; insurers are committed to helping consumers make informed decisions about what protection is right for them and how to avoid having a claim declined.”

The type of product where claims are most likely to result in payouts is whole of life claims where 99.9 per cent were paid out. Only 38 claims of the 43,529 in this area were declined, although the average claim paid on this product type was relatively low compared to other types at £10,300. Most declines came from permanent disability - 669 claims were received, and 62.2 per cent were paid out. The average payout from permanent disability, however, was £66,700.

These figures could go some way to improving the perception of insurance products and confidence in them. Chris McNab, manager of protection products at LV=, said decisions made by insurers across the industry have contributed to the ABI’s findings. “We’ve made changes around the breadth and simplicity of cover, and aligning definitions to customer expectations, for example paying upon diagnosis rather than by severity in cases of stroke and heart attack,” he said.

“On income protection, we’ve moved to own occupation definition, rather than task-based definitions. As an industry we’ve always strived to let people know how important it is to provide accurate answers to questions, because that’s the basis on which we’re giving them insurance.”