Insurance pay-outs jump 11%: ABI

Insurance pay-outs jump 11%: ABI

Last year, £3.44bn was paid to nearly 125,800 customers or families, which is an 11 per cent increase on 2013, according to the Association of British Insurers.

The data showed the ABI received 72,962 ‘whole of life’ insurance claims, of which 99.98 per cent were paid, equating to £540m.

For whole life insurance, the average claim payment was £7,400.

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Just over 25,000 claims were received for ‘term life’ insurance, of which 98.7 per cent were paid, totalling £1.5bn.

The average pay-out on a term life insurance policy was £60,900 with 98.7 per cent of claims being paid. In 2014, insurers paid out more than £1.5bn in claims.

Around 15,652 claims were received for critical illness, with 92 per cent paid, totalling £965m and 14,293 individual income protection claims were received of which 92.9 per cent were paid equating to £134m.

The average pay-out in 2014 on a critical illness insurance policy was £67,000.

The ABI said there has been a “steady increase” 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 individual income protection policy pay out, which helps those unable to work due to illness or injury, lasted for nearly four years and was worth £39,200.

James Dalton, ABI director in charge of protection policy, said: “At the most stressful times, insurance can make a real difference.

“These figures show that 97.7 per cent of all types of protection policy claims are paid allowing people to focus on other challenges. As well as relieving the financial strain, insurance policies can provide support during a difficult time.

“For example, income protection policies can offer rehabilitation and back to work support services.

“However, many households still have no real financial safety net. Each year, 1m workers suddenly find themselves unable to work for more than four weeks due to serious illness or injury.

“Insurance can play a role in improving families’ financial security, to help them after the loss of a loved one or support them if they are unable to work.”

Total permanent disability claims averaged £73,200 with 64.1 per cent of claims paid in 2014, up from 50 per cent in 2009.

The ABI emphasised that before it introduced a ‘standard definition’ for total permanent disability in the criticial illness statement of ‘best practice’ in 2011 there was no “standard definition” for what circumstances qualified.

The ABI said that 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; this trend will continue as all new TPD policies are tested against the industry standard set by the ABI.”