Protection claims payouts hit a new record in 2021, according to data from the Association of British Insurers (ABI) and Group Risk Development (Grid).
The data reveals £6.8bn was paid out in individual and group life insurance, income protection (IP) and critical illness (CI) claims over the year. This equated to £18.6m a day, £1.6m a day more than the previous record set in 2020.
The increase coincided with a 1.6% drop in the total number of new claims paid. The rise in value was due to more individual term assurance and critical illness claims, which have much higher values. The average payment was £61,944 for term assurance and £67,500 for critical illness, which is consistent with 2020.
This is the third consecutive year the average individual payout has increased, and the average value for a claim is up 9% on 2020, to £14,994.
Overall 98% of individual and group claims were paid in 2021 which was consistent with data from the last three years.
The main reason behind an individual protection claim being rejected was non-disclosure where customers fail to tell their insurer something at the outset that might have affected the insurer’s decision to provide cover and the price of that cover.
The total value of Covid-19 related individual claims almost doubled in 2021 to £261m in spite of the number of claims paid remaining almost identical to 2020.
This was due to a 69% increase in term assurance claims, where the average payment was £69,760.
Earlier this month Grid published detailed claims data for the group risk industry which showed a total of £2.22bn from 30,932 claims was paid out by the sector during 2021, an increase of £208.4m.
IP claims down 14%
The number of individual income protection claims fell from 17,000 to 14,600.
Researchers speculated this drop could have been for a number of reasons, including more people still being on the government’s furlough scheme and higher unemployment levels.
The year was also one in which insurers increased their early intervention offerings, with specialist support services and rehabilitation schemes, making it less likely for issues to reach the point of making a claim.
But individual IP claims for musculoskeletal conditions increased to 5,012 in 2021.
This was largely driven by the return of products that had shorter deferred periods, which had been halted during the pandemic, and more people using limited term payment products.
This increase was also linked to more people working from home, with unsuitable working environments and equipment leading to back problems.
After a significant rise in mental health claims under individual IP in 2020, claims decreased by almost 20% in 2021. However, they remain higher than in 2019, suggesting that the pandemic continues to affect the UK’s mental health.
Roshani Hill, assistant director, head of protection and health, at the Association of British Insurers, said: “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,” she added.
