Individual and group life insurance, income protection, and critical illness claims totalled a record £6.8bn in 2021, according to the latest figures from the Association of British Insurers (ABI) and Grid.
This amounted to £18.6m per day, £1.6m more than the previous high of 2020. Despite a 1.6 per cent decline in the total number of new claims paid, individual protection claims increased dramatically.
This is due to an increase in the number of individual term assurance and critical sickness claims, both of which have substantially greater values. In terms of term assurance, the average claim payment was £61,944 and £67,500 for critical illness, which is comparable with 2020.
The average individual payout has climbed for the third year in a row, and the average claim value is up 9 per cent from 2020, to £14,994. Payouts for Covid-19-related individual claims nearly doubled in 2021, to £261m. The reason for this was a 69 per cent increase in term assurance claims, with an average payment of £69,760.
In 2021, 98 per cent of both individual and group claims were paid, continuing the trend of the previous three years. Non-disclosure was the most common cause for an individual protection claim being denied. This occurs when a consumer fails to inform their insurer of information that could have influenced the insurer’s choice to provide coverage and the price of that coverage.
Individual income protection claims decreased by 14 per cent, from 17,000 to 14,600. Furthermore, in 2021, there were 5,012 individual income protection claims for musculoskeletal conditions. Back problems have also increased as a result of more people working from home, with inadequate working surroundings and equipment.
Individual income protection claims declined by about 20 per cent in 2021, following a substantial increase in mental health claims in 2020, but they are still higher than in 2019.
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.
“Payouts for Covid-19 related claims almost doubling in 2021 is a stark reminder of the devastating impact the pandemic has had on society and people’s lives. Although nothing will ease the distress of loss, protection insurance is there to reduce some of the financial risks and stresses that can accompany these difficult and unpredictable events.”
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