Insurers paid out £6.2bn in life insurance, income protection, and critical illness claims in 2020, equivalent to £17m a day, according to figures from the Association of British Insurers (ABI) and Group Risk Development (Grid).
This the highest combined figure on record and is up 8% on 2019 and iIn the group risk sector, it is noteable that useage of ancillary support services almost doubled during 2020.
While there was a rise in mental health claims under individual income protection (IP) – up from 10% to 12% in 2020, there was a 6% fall in the number of critical illness (CI) claims paid last year, with their value down by 7% on 2019.
Overall across the protection industry, 98% of all claims were paid, virtually unchanged from 2019.
The average payout on term life insurance policies, from individual and group combined, was £79,304 with a total value of £3.4bn paid in life insurance claims, up by £349m year on year.
For IP the average payout was £22,000, with musculoskeletal illnesses the most common claim under individual policies and non-disclosure was the biggest reason for declining individual claims.
Full data breakdown
Products |
New claims paid** |
Percentage of 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
Group risk benefits useage soars
Group risk benefits of life assurance, IP and CI provided by employers paid out a record £2.01bn to employees and their dependants in 2020.
Group life assurance policies paid out £1.37bn, up £199.78m from 2019, group IP policies paid out £550.86m, up £57.88m from 2019, and group CI policies paid out benefits totalling £91.64m, down £1.96m from 2019.
Interactions with other embedded services such as an employee assistance programmes, HR and line manager advice, online GP services, second medical opinion services and physical and mental health apps almost doubled to a record number of 138,222 interactions from 74,707 interactions during 2019.
Where the type of support service interaction was on record, insurers saw significant online and telephone usage: 45% online, 42% telephone, 11% face-to-face.
Grid also captured details of the cases where the insurer supported a return to work with active early intervention before that employee was eligible for a monetary payment.
In all 2,362 people consisting of 31.8% of all claims submitted, were able to go back to work during 2020 because of early intervention with 59% assisted to overcome mental illness and 11% had supported overcoming a musculoskeletal condition.
This support continued once claims were in payment, with 2,114 employees assisted by their group IP insurer to make a full return to work during 2019 or 2020.
Benefit |
No. of claims |
Value of claims paid* |
Average new claim amount |
% of new claims paid for 2020 |
Group Life Assurance |
11,592 |
£1,370.6m |
£118,244 |
99.8% |
Group Income Protection |
15,837 ** |
£550.86m** |
£28,138*** |
76.2%**** |
Group Critical Illness |
1,304 |
£91.64m |
£70,274 |
77.4%***** |
Totals |
28,733 |
£2,013.1m |
|
Main causes of claim across all group risk products
Benefit |
Main cause of new claims |
% |
Second main cause of new claims |
% |
Group Life Assurance |
Cancer |
37% |
Heart Disease |
14% |
Group Income Protection |
Cancer |
28% |
Mental Illness |
22% |
Group Critical Illness |
Cancer |
67% |
Heart Attack |
9% |
Paul Brencher, managing director of individual protection at Aviva UK, and chairman of the ABI 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.”
ABI health and protection manager Charlie Campbell 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.”
Katharine Moxham, spokesperson for Grid, added: “The group risk industry is growing year on year and these figures demonstrate why. They’re some of the most valued benefits for employers and employees.
“Their value is tangible, financial and practical, and employers recognise just how much they help their business and their workforce.
“This year, health and wellbeing is firmly at the top of the corporate agenda, and we expect employers of all sizes to even more fully embrace the value that group risk benefits provide.”
