One of the common misconceptions many people have about life insurance and other types of protection is that “insurers do everything they can to avoid paying out”.
New figures from the official industry body firmly refute that myth, with the latest data showing that insurers paid almost £7 billion in protection claims in 2022 alone.
The latest data from the Association of British Insurers (ABI) reveals that insurers paid more than 300,000 claims in 2022, with a staggering 98% of all claims paid.
There were more than 287,000 successful individual life insurance, income protection, and Critical Illness claims in 2022, totalling £4.64 billion. The average payout from these policies increased for the third year in a row, from £14,931 to £15,448 (a 9% rise).
Group policies, which provide protection products through an employer, paid out £2.21 billion in claims.
Read on to find out how insurers are paying out billions to support individuals and families across the UK.
Almost £4 billion of life insurance claims paid
The ABI data shows that insurers paid £3.9 billion in term life insurance claims in 2022. More than 53,000 individual life claims were paid, with the average claim providing a lump sum of £73,578.
In addition, more than 213,000 whole-of-life policies paid out more than £860,000 in 2022, with the average claim just over £4,000. These are mainly over-50s plans and other policies designed to provide for funeral and associated costs on death.
- Term life insurance payments are for policies that cover you for a specified number of years, either to coincide with your mortgage term or to your retirement age. This type of policy pays a lump sum, commonly used to cover outstanding mortgage payments, if you die unexpectedly or prematurely.
- Whole-of-life insurance policies cover you until the day you die. It allows you to build a small pot of savings to use to cover funeral costs, or to leave a small inheritance to your loved ones.
All in all, 97% of term life insurance claims were paid in 2022, alongside 99.99% of all whole-of-life claims.
More than £1.2 billion paid in Critical Illness cover claims
Critical Illness cover is designed to provide you with financial support if you’re diagnosed with a serious medical condition.
Most Critical Illness claims are for:
- Serious forms of cancer
- Heart attack
- Multiple sclerosis
Most policies also cover a range of other serious conditions such as Parkinson’s disease, the loss of sight or a limb, or early onset Alzheimer’s.
In 2022, insurers paid more than £1.2 billion in Critical Illness claims, supporting more than 19,000 individuals and their families. The average sum paid under a Critical Illness cover claim in 2022 was £66,296.
Number of individual income protection claims increased by 9%
Income protection is designed to help fill an income gap when you are unable to work due to illness or injury. It will usually cover a percentage of your salary – typically up to around 60% – and you can often benefit from support services that will help you back into work.
More than 15,900 people claimed against their individual income protection policies in 2022, a 9% increase from the previous year. The total value of claims also increased by 22%, with £231 million paid to people who were unable to work.
The main cause for individual protection claims was for musculoskeletal issues such as neck and back pain, accounting for 34% of all claims. This is the second year in a row that musculoskeletal issues have been the leading cause of claims.
More than half of declined claims were due to non-disclosure
Over the last five years, the number of new individual protection claims paid has remained consistent at around 98%.
This means that there are a small number of claims each year that aren’t paid.
The ABI say that, in more than half of the declined claims, customers had not told their insurer key details about themselves or their circumstances when they took out the policy.
This is called “non-disclosure” and includes situations such as:
- An applicant told the insurer that they were a non-smoker when they did smoke
- An applicant failed to disclose details of previous or current medical conditions or treatment
- Details of high-risk jobs or hobbies were not disclosed.
A common other reason for the non-payment of a protection claim is where a claim doesn’t meet the specific conditions of the policy. For example, some minor heart problems, or certain types of less serious cancer are not covered under all Critical Illness contracts.
You can trust your protection policy to provide support when you and your loved ones need it
What these ABI figures show is that insurers do pay out the majority of claims. With 98% of claims paid in 2022, you can be sure that, if you provide accurate and honest information when you apply for cover, that your policy will pay out when you need it to.
It’s a valuable safety net that ensures you and your loved ones will benefit from financial support if:
- You were to die prematurely
- You were to be diagnosed with a serious illness, and had to take an extended period off work to recuperate
- You were off work due to an accident, injury, or illness.
In each of these scenarios, you or your family would have to maintain regular commitments such as your mortgage payments or rent, utility bills, and other living costs.
For example, with an average payout of £66,296, if you were diagnosed with a serious illness you would receive a lump sum that could help you replace income, repay debts, or make adaptations to your home to aid your recovery.
ABI Head of Protection and Health, Rebecca Deegan, said: “When you suffer a loss, fall ill or are badly injured, the last thing you want to be worrying about is your finances, especially during a cost of living crisis.
“That’s why the security that protection products can provide is so important. With another year of bumper figures and the vast majority of these claims being paid, it’s encouraging to see that individuals and their families continue to be supported through insurance.”
Get in touch to find out how we can help you
If you want to benefit from the peace of mind that you and your family will be protected against the unexpected, we can help.
We’re life insurance, Critical Illness cover, and income protection experts and can help you to find the right cover for your specific needs.
We work with the UK’s leading insurers, including Legal & General, Aviva, Scottish Widows, Zurich, Vitality, and Royal London. We will search the market on your behalf and compare the premiums from each of these insurers, to help you find the best value premium for your needs.
We can also help you throughout the application process, and help you deal with any underwriting queries and challenges. We can also help you to write your policy in trust if that would benefit you.
- Our service is fast, free and secure
- We help you find specialist life insurance cover – perhaps if you have pre-existing medical conditions or you want life insurance and you live in the Isle of Man or Channel Islands
- We will compare cheap life insurance quotes on your behalf.