Insurers paid out a record £6.2 billion in 2020, with the total value of claims paid up by 8% on 2019
Latest figures out today from the Association of British Insurers (ABI) and Group Risk Development (GRiD) show that the insurance industry paid out £6.2 billion in life insurance, income protection, and critical illness claims in 2020, the equivalent of £17 million a day, the highest combined figure on record and up 8% on 2019.
Earlier this year, the ABI published figures highlighting the £202 million paid by insurers in 2020 to help the families of those who were tragically affected by Covid-19.
These latest figures also show a rise in mental health claims under individual income protection – up from 10% to 12% in 2020. This further highlights the impact of the pandemic on the mental health of the UK population. The ABI’s recently launched mental health training platform, developed with mental health experts, aims to help train 5,000 advisers and front-line insurer staff to better engage with customers who disclose a mental health condition.
However, there was a 6% fall in the number of critical illness claims paid last year, with their value down by 7% on 2019. This may in part be due to some illnesses going undiagnosed during the period of unprecedented pressure on medical services during the pandemic.
The pandemic dramatically highlighted the crucial role of the financial safety nets and support services provided by insurers. This support includes lump sum payments to provide financial support following a bereavement or diagnosis of serious illness and monthly payments to replace lost income following ill health or injury. Insurers also offer rehabilitation services to help customers return to work after an illness and they provide a wide range of extra services to support their customers’ health, such as enhanced online medial consultations.
During the pandemic, insurers supported the NHS by finding alternative routes to source medical evidence to support claims and were flexible with customers experiencing financial hardship.
Highlights from the data
- The equivalent of £17 million paid every single day in 2020, which is £1.16 million a day more than in 2019
- The average payout on term life insurance policies (individual and group) was £79,304. The average payout was £22,000 on income protection policies.
- 98% of all claims were paid, virtually unchanged from 2019.
- £3.4 billion was paid in life insurance claims, up by £349 million year on year.
- Musculoskeletal illnesses were the most common claim under individual income protection.
- Non-disclosure was the biggest reason for declining individual income protection claims.
Paul Brencher, Managing Director, Individual Protection at Aviva UK, and Chair of the ABI’s Protection Board, said:
“The financial risks from ill-health are not new, but the pandemic has dramatically highlighted how the financial resilience of families can be so easily tested. There has never been a more important time to demonstrate the benefits of protection, the safety nets it can provide to customers and their families in difficult times, and its relevance for employers and financial advisers.”
Charlie Campbell, the ABI’s Manager, Health and Protection, said:
“The record payout to help families cope with death, illness and injury shows how insurers give vital financial support to their customers during what are difficult and stressful times. The pandemic reinforced just how valuable the protection provided by insurers has been. The high number of claims paid should give people confidence they can trust that their insurance provider will be there when they need them.
“However, non-disclosure of relevant medical information, and the condition not being covered were the two main reasons for the 2% of claims that were declined. This emphasises the need for customers and advisers to disclose all relevant health information when applying for cover, and for insurers to continue to improve the clarity and understanding of what is and what is not covered”.
Full data breakdown
|
Products |
New claims paid** |
Percentage new claims paid |
Total value paid (000s)** |
Average value of claim paid** |
|
Critical Illness |
16,845 |
91.3% |
£1,128,825 |
£67,011 |
|
Life |
43,160 |
97.0% |
£3,422,788 |
£79,304 |
|
Total Permanent Disability |
391 |
66.4% |
£28,102 |
£71,939 |
|
Whole of Life |
237,458 |
99.99% |
£956,021 |
£4,026 |
|
Income Protection |
27,281* |
86.5% |
£688,256 |
£22,170 |
|
All Protection Products |
325,136 |
98.0% |
£6,223,992 |
|
*Includes figures from the Association of Financial Mutuals
**Figures are for new claims, as well as income protection claims in payment
Products explained
- Critical Illness: A policy that pays out a lump sum, or ongoing payments, when the policyholder is diagnosed with a specified illness. Cancer is the most common cause of claim.
- Term Life Insurance: A policy that will cover the policyholder for a specified number of years, usually until retirement age. This policy pays a lump sum, commonly used to cover outstanding mortgage payments, if the policyholder dies unexpectedly or prematurely.
- Total Permanent Disability: This benefit pays a lump sum, or lifelong payments to the policyholder if they become permanently disabled.
- Whole of life Insurance: A product that covers the policyholder until the day they die. It allows the policyholder to build a small pot of savings to use to cover funeral costs, or to leave a small inheritance to family members.
- Income Protection: A policy designed to help fill income gaps when a person is unable to work due to illness or injury. It will usually cover a percentage of the policyholder's salary and will often provide support services to help employees back into work.
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