According to the stats, this was a 1 percentage point increase on 2015, when claims paid stats for group protection were at 96 per cent.
This equated to a total of £264m paid in all group protection claims - a rise on 2015, when the total figure was £235m.
The top cause of claims for the FTSE 100 insurer was still mental health issues, which have remained at the top of the list since 1999, far above other claims such as back injury or stroke. They accounted for 33 per cent of new claims in 2016, up from 30 per cent in 2015.
As a result, Legal & General is developing a major initiative to encourage more open conversations about mental health in the workplace.
Vanessa Sallows, benefits and governance director at Legal & General’s Group Protection, said: "Mental health continues to be the main reason for absences on our group income protection.
"We know that earlier treatment makes an earlier return to work more likely so it’s thrilling to see over a third of people taking advantage of the flexibility provided by our new digital mental health treatments."
Legal & General's group protection policies, which include specialist intervention, have enabled staff to have therapy treatments, helping to get employees back to work. L&G has arranged and paid for over 5,100 psychological and physiotherapy treatments in 2016.
Ms Sallows added that employers, advisers and providers should talk about mental health "as freely as we discuss physical health".
Key highlights from the Legal & General group claims statistics:
In April, claims for insurer Vitality also showed a high payout ratio for individual life insurance claims. According to the provider, it paid out on 99 per cent of 2016's life insurance claims.