Many claimants are in danger of delays due to current faults in life insurance policy setting procedures, and they are not guaranteed access to death payments, according to Swiss Re.
The report, titled Life Claims: A Beneficial Direction, which was released today by Swiss Re and Insuring Change, looks at the possibility that term life insurance contracts could cause claims to be delayed or paid to someone other than the policyholder’s specified beneficiary.
The research findings reveal several key trends. The beneficiary gap for new single-life term plans declined from 84 per cent in 2021 to 79 per cent. This decline was matched by a drop in the expected number of new single-life policies that were not in trust, which fell to about 962,000 as a result of a decline in term sales overall, including life cover.
The market’s share of single life plans climbed to 78.8 per cent from 78.6 per cent the year before, and they made up 91.2 per cent of total level term life insurance, including those with critical illness protection.
Sales of non-advised level term life-only (LTA) policies fell year over year, from 98,761 policies in 2021 to 42.2 per cent in 2022, accounting for roughly a quarter of the market. The average time it takes to grant a probate or administration grant in England and Wales has also noticeably increased recently.
According to the research, there are also an estimated eight million active policies that are not held in trust; up to two million of these plans could be held by a cohabitee whose partner would not necessarily receive the payout if intestacy rules were to be followed.
Swiss Re industry affairs manager Jo Scott says: “While it’s great to see a growing number of advised policy sales, we absolutely must improve the policy ownership experience where customers buy without a discussion with an adviser. Equally, there is no room for complacency in the advised sector if we are to build on this progress.
“Consumer Duty brings the need for policy ownership to be brought to the forefront of the new business process, irrespective of whether the customer buys through an adviser or without advice. Having widespread availability of simple solutions to ensure that policies can pay out quickly to the intended person is more pressing than ever.”
Insuring Change partner Ruth Gilbert says: “It’s reassuring to see that these adoption rates show intermediaries and customers responding to the simplicity of the solution with the enthusiasm hoped for.”
Swiss Re technical manager Ron Wheatcroft says: “Although insurers have financial limits up to which they will pay without waiting for probate, this doesn’t help if the intended beneficiary has no right to claim. Also, limits and criteria for qualifying up to these limits, such as the existence of a will, vary and may not be transparent to advisers or consumers.
“Uncertainty caused by probate delays and intestacy rules risk poor claim outcomes for the intended beneficiary, so there are very good reasons to include an assessment of policy ownership and a resulting action plan in existing business reviews.”
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