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Protection Claims 2013 QA

  1. What are each of the “protection” products in this data?
  2. - Life insurance is a pre-determined cash lump sum on death, during the term of the policy (term insurance) or wherever death occurs (Whole life)

    - Critical Illness insurance pays out a lump sum when an illness like cancer, heart attack and stroke meets a certain degree of severity

     - Terminal Illness insurance is an ‘advance’ payment under a term life policy, where death is expected - within 12 months and the illness either has no known cure or has progressed to the point where medical advisersbelieve it cannot be cured

     - Income Protection (IP) insurance will pay an income if the policy-holder is unable to carry out their job due to illness or injury and it results in a loss of income. 

    - A Total Permanent Disability claim would be met when physical or mental ability, through an illness or injury (usually before a set age) results in the insured person being unable to perform the duties of their occupation ever again or indeed being able to complete certain everyday tasks. Crucially, the relevant specialist will assess if the disability will last for rest of the insured person’s life, with no prospect of improvement.

  3. Why is the ABI publishing claims data on protection insurance?
    The ABI is committed to helping consumers make informed decisions about which protection insurance product is right for them and how to avoid having a claim declined.  A very high percentage of protection insurance claims are paid; the ABI’s commitment to transparency will help consumers and advisers understand why a small percentage of claims are not paid and how they can avoid their claims being declined.
  4. How much in total was paid out in protection claims in 2013?
    The table below details claims details by different protection products. Overall,  £3.1billion (excluding group protection) was paid out in protection claims in 2013, which means insurers made payments totalling £8.4million to 270 families each day of 2013 across all protection products. 
  5. Type of Product

    Number of Claims

    Total value paid

    (£000)

    Average Claim Paid in (£s)

    Received

    Paid

    % Paid

    Declined

    % Declined

    Term Assurance

    25,845

     

    25,424

    98.4%

    422

    1.6%

    1,310,450

    51,500

    Terminal Illness

    2,675

    2,448

    91.5%

    227

    8.5%

    239,930

    98,000

    Critical Illness

    16,496

    15,144

    91.8%

    1,352

    8.2%

    914,888

    60,400

    Total Permanent Disability

    669

    416

    62.2%

    253

    37.8%

    27,755

    66,700

    Whole of Life

    43,529

    43,491

    99.9%

    38

    0.1%

    449,144

    10,300

    Individual Income Protection1

    13,170

    12,004

    91.1%

    1,166

    8.9%

    138,443

    11,500

    Total claims

    102,384

    98,927

    97%

    3,457

    3.%

    3,080,610

    31,140

    Note: Claims paid includes those that were in payment at the start of the year and new claims where a decision was made during the year.

  6. How has the ABI data collection system improved in recent years and what percentage of the market does this data cover?
    This year the ABI has further increased the range of products (Whole of Life Assurance and Terminal Illness) and providers included in the claims’ statistics for instance, so 90% of the market is represented in these statistics.  The ABI has collected data from member insurance providers using a standard definition and measure for each type of data collected. This has ensured consistency in the data reported to the ABI.
  7. How does this data for 2013 compare to ABI data published in previous years?
    The figures are not strictly comparable with figures from earlier years, as the ABI has expanded the range of products and providers in the 2013 statistics.  However 2012 statistics revealed that 98% of life insurance claims, 92% of income protection and 91% of critical illness claims were paid.
  8. Are the number of successful claims for Critical Illness insurance rising, if so why?
    Yes, this year’s figures illustrate that the number of critical illness insurance claims being paid has risen. Despite the inclusion of more products and providers in the statistics the percentage of claims paid in 2013 has increased to 92% from 91% in 2012; this is up from 80% in 2005.  This increase is largely due to the ABI’s Code of Practice on non-disclosure which was first issued in 2008. This document clarified which medical information customers needed to share with insurers and how insurers would treat non-disclosure (also known as misrepresentation) found at claims stage. This clarification has led to a marked increase of claims being paid rather than declined.
  9. Why was a disproportionate number of Total Permanent Disability claims declined?
    Before the ABI introduced the standard definition for Total Permanent Disability (TPD) in the Critical Illness Statement of Best Practice in 2011 there was no standard definition of what circumstances qualified as “total permanent disability”. This lack of clarity led to claims being made that did not qualify.  The introduction of a standard definition has meant that the number 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.
  10. Why have the number of declined claims increased for Individual Income Protection products?
    Between 2012 and 2013 the number of declined income protection claims has increased from 7.7% in 2012, to 8.9% in 2013. The ABI has expanded the range of providers included in the 2013 statistics (to cover 90% of the whole protection market) so this does mean that figures from previous years are not directly comparable, as the 2013 figures cover a far greater proportion of the market.
  11. Are there single industry definitions of Critical Illness conditions or does each ABI member use their own?
    The ABI Statement of Best Practice sets out definitions for the majority of critical illness conditions; establishing the benchmark for those conditions. Following these standards is mandatory for ABI members that offer Critical Illness cover.
  12. What has the industry done to ensure plain language is used, avoiding jargon?
    In 2013 the ABI organised a Protection Language Working Group, which made a series of recommendations for ABI members to follow. These included using jargon free-terms, and asked members to communicate with customers in plain language.
  13. How can customers avoid their claims on protection insurance being declined?
    The most common reason for claims being declined was non-disclosure of information by the customer when they applied to buy the insurance product. Customers must answer all questions fully when submitting an application for insurance cover. If in any doubt about whether something should be disclosed, consumers should provide the information to the insurer and allow the insurer to decide.
  14. What are some of the most common reasons for claims to be declined?
    Insurers are in business to pay claims, not to decline them. 97% of all protection claims in 2013 were paid, while 3% were declined.   The most common reason for claims being declined was non-disclosure of information by the customer when applying to buy the product. As with all insurance products, it is important that questions on an insurance application form are completed fully and accurately; which will minimise delay or problems if a claim needs to be made.
  15. These figures include aggregated claims statistics from new entrants to the protection market and established providers; as a result do the declines rates accurately reflect the whole protection market?
    There will obviously be differences between established market providers, some of whom have offered protection products for 100 years, and new entrants to the market. New entrants with fewer customers can have disproportionately high decline rates, because a small number of claims represent a much bigger percentage of a small number of customers than a large number of customers. These statistics are intended as a guide to the whole market and each provider will usually publish their own statistics to highlight their company’s specific claims rates.
  16. Why does the ABI not publish Group Income Protection figures?
    Aggregate industry Group Protection claims data has been published by Group Risk Development (GRiD). This data should be read as in addition to the protection market claims data published by the ABI, as it reflects additional protection claims paid and declined. Group protection is bought by employers to provide support to them and their employees.

Last updated 01/07/2016