New Figures Highlight Important Role Of Life Insurance

New figures have highlighted the important role of life insurance in helping families cope financially in the event of a loved one’s death, as the protection industry witnesses an uptick in claims driven by the Covid-19 pandemic.

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Record Protection Claims Paid in 2021

A record £6.8 billion was paid in 2021 for individual and group life insurance, income protection and critical illness claims, according to the latest figures from the Association of British Insurers (ABI) and Grid.

All of these claims amounted to £18.6 million per day – £1.6 million more than the previous high recorded in 2020. This is despite a 1.6% drop in the total number of new claims paid. The reason for this was because more term assurance and critical illness claims – which tend to have much higher values – were paid last year. Indeed, the average term assurance claim payment was £61,944, while critical illness claims averaged £67,500.

Last year, 98% of individual and group claims were paid, maintaining the trend of the previous three years. Among the 2% of claims that were not settled, non-disclosure was the most common cause for denial. Non-disclosure is when a customer neglects to tell an insurer something important at the outset which could impact the quote price or even the decision to provide cover.

Association of British Insurers head of protection and health Roshani Hill, Assistant Director says: “Experiencing loss, injury or illness can be a deeply distressing time. Coupled with the backdrop of a global pandemic and financial uncertainty with the cost of living crisis, the role of insurance as a financial safety net is arguably more important now than ever before.

Covid Drives Increase In Life Insurance Claims

New data from insurer Aegon reveal a significant increase in the number of protection claims paid in 2021 vs. 2020.

According to Aegon’s latest published figures, the insurer paid 7% more claims last year than the previous year. Aegon said this increase was largely driven by more life insurance claims, which rose by 21% year-on-year. The insurer said that while cancer remained the most common reason for life insurance claims, accounting for over a third, respiratory-related illnesses accounted for 20% – a threefold increase over 2019. Cardiovascular-related illnesses accounted for 19% of life insurance claims.

In total, in 2021, Aegon paid out £139 million in protection claims, equivalent to 94% of all claims the insurer assessed.

Interestingly, Aegon noted that critical illness claims were down 12% in 2021 compared to pre-pandemic levels. The insurer said that this was unlikely to be due to a decrease in illnesses such as cancer, stroke and heart attack, rather delayed or no diagnoses, as a result of NHS services experiencing backlogs.

[Related reading: More People Turning To PMI As NHS Backlogs Continue]

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Life insurance can play an important role in the event of a loved one dying, providing a financial safety net for the people left behind. The fact that such a high percentage of claims were paid last year highlights just how many people this crucial protection offering helped.