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Payouts for bereavement, illness and injury claims reach £18.6m per day
21 May 2022, 00:04
A record £6.8 billion was paid out in individual and group life insurance, income protection and critical illness claims in 2021.
Around £18.6 million was paid out per day last year typically for bereavement, illness, and injury claims, industry figures reveal.
A record £6.8 billion was paid out in individual and group life insurance, income protection and critical illness claims in 2021, with a jump in the value of Covid-19-related payouts.
The figures were released by the Association of British Insurers (ABI) and Group Risk Development (GRiD).
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 high values.
The average claim payment for term assurance was £61,944 and £67,500 for critical illness.
Term life insurance 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.
Critical illness cover pays out a lump sum, or ongoing payments, when the policyholder is diagnosed with a specified illness. Cancer is the most common cause of a claim.
The total value of Covid-19-related individual claims nearly doubled in 2021, jumping to £261 million, despite the number of claims paid remaining steady compared with 2020. This was due to an increase in high-value term assurance claims.
There was an increase in individual income protection claims for musculoskeletal conditions last year.
The increase has partly been linked to more people working from home, with unsuitable working environments and equipment leading to back problems, the ABI said.
There were nearly 20% fewer mental health claims under individual income protection in 2021 compared with 2020, although levels remain higher than in 2019, suggesting that the pandemic continues to have an impact on the UK’s mental health.
Income protection policies 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.
Roshani Hill, assistant director, head of protection and health at the ABI 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.”