A record £6.8 billion was paid out in individual and group life insurance, income protection and critical illness claims in 2021, according to the latest figures from the Association of British Insurers (ABI) and Group Risk Development (GRiD). This equated to £18.6 million a day, £1.6 million a day more than 2020’s previous record.
The bumper increase in individual protection claims occurred despite a 1.6% drop in the total number of new claims paid. This is due to more individual term assurance and critical illness claims, which have much higher values. The average claim payment for term assurance was £61,944 and £67,500 for critical illness, which is consistent with 2020.
This is the third year in a row that the average individual payout has increased, and the average value for a claim is up 9% on 2020, to £14,994.
Covid-19 payouts almost double
Payouts for Covid-19 related individual claims almost doubled in 2021, to £261 million, despite 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.
98% of claims accepted
Continuing the trend of the last three years, 98% of both individual and group claims were paid in 2021. The main reason behind an individual protection claim being rejected was ‘non-disclosure’. This is when a customer doesn’t tell their insurer something at the outset that might have affected the insurer’s decision to provide cover and the price of that cover.
Individual Income Protection fell by 14%
The number of individual income protection claims fell from 17,000 to 14,600.
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.
Insurers also increased their early intervention offerings in 2021, with specialist support services and rehabilitation schemes, making it less likely for issues to reach the point of making a claim.
40% more claims for musculoskeletal conditions
Individual income protection 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 stopped during the pandemic, and more people using limited term payment products.
The increase has also been linked to more people working from home, with unsuitable working environments and equipment leading to back problems.
20% fewer mental health claims
After a significant rise in mental health claims under individual income protection in 2020, claim
s decreased by almost 20% in 2021. However, they are still higher than in 2019, suggesting that the pandemic continues to have an impact on the UK’s mental health.
Roshani Hill, ABI Head of Protection and Health 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.”
Full individual and group data breakdown
|
Products |
New claims paid** |
Percentage new claims paid |
Total value paid (000s)** |
Average value of claim paid** |
|
Critical Illness |
18,016 |
91.3% |
£ 1,224,200 |
£ 67,951 |
|
Life |
48,091 |
97.3% |
£ 3,870,633 |
£ 80,485 |
|
Total Permanent Disability |
378 |
67.7% |
£ 28,067 |
£ 74,209 |
|
Whole of Life |
229,586 |
99.99% |
£ 947,031 |
£ 4,125 |
|
Income Protection |
27892* |
86.0% |
£ 734,677 |
£ 23,380 |
|
All Protection Products |
296,071 |
98.0% |
£ 6,804,609 |
|
*Includes figures from the Association of Financial Mutuals
**Figures are for new claims, as well as income protection claims in payment
Products explained
- Critical Illness: A policy that pays out a lump sum, or ongoing payments, when the policyholder is diagnosed with a specified illness. Cancer is the most common cause of claim.
- Term Life Insurance: A policy that will cover the policyholder for a specified number of years, usually until retirement age. This policy pays a lump sum, commonly used to cover outstanding mortgage payments, if the policyholder dies unexpectedly or prematurely.
- Total Permanent Disability: This benefit pays a lump sum, or lifelong payments to the policyholder if they become permanently disabled.
- Whole of life Insurance: A product that covers the policyholder until the day they die. It allows the policyholder to build a small pot of savings to use to cover funeral costs, or to leave a small inheritance to family members.
- Income Protection: A policy designed to help fill income gaps when a person is unable to work due to illness or injury. It will usually cover a percentage of the policyholder's salary and will often provide support services to help employees back into work.
Notes to editors
For full details of the figures collected for the group risk protection market, please refer to GRiD’s statement from 12 May 2022.
For more information contact the Press Office.