Overall, 97 per cent of group and individual protection claims were paid last year, according to the latest Association of British Insurers industry figures.
Published in association with Group Risk Development, the statistics show insurers paid out more than £5bn last year in group and individual protection insurance claims, the equivalent of almost £14m a day.
Protection insurers also paid more than 153,700 claims in total last year.
When claims were declined this was usually 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 report noted.
Raluca Boroianu-Omura, the ABI’s assistant director for protection and health, stated the importance of encouraging people to consider the financial risks if they need to leave work because of illness or injury.
“As well as financial support, protection insurance can help prevent people needing to leave work, and if they do need to leave due to illness or injury, rehabilitation services can help them return to work sooner.
“As a result, protection insurance benefits individuals and employers, and relieves the burden on the state, helping the economy to grow.”
|Types of products||Received||Paid||% Paid||Declined||% Declined||Total value paid (£000)||Average Claim Paid in (£s)|
|Total Permanent Disability||875||581||66.4%||294||33.6%||37,889||65,213|
|Whole of Life Assurance||65,672||65,664||99.9%||8||0.01%||389,080||5,925|
Steve Berry, protection manager for First Complete, said protection is often wrongly perceived as an opportunity for brokers to upsell, offering little benefit to the customer.
He said: “The ABI’s latest figures highlight not only the importance of having protection insurance, but just how regularly it is paid out. However, protection is clearly still being undersold, particularly income protection.
“Moving forward, the perception of brokers selling protection needs to change. Too often brokers efforts in selling protection are dismissed as ‘life assurance salesmen just looking for a commission’, he continued, adding: “So, alongside these figures we therefore need to see hard hitting facts about the financial reality of not being covered.”
Several mortgage industry figures have urged brokers to secure their businesses with the recurring income streams that insurance sales can provide.
The Seven Families charity project launched a financial vulnerability test to highlight the need for income protection this week, with Income Protection Task Force chairman Peter Le Beau also confirming the end date for the overall project, which will be 31 July.