Protection figures ‘shatter illusion’ of declined claims

The latest statistics from the Association of British Insurers (ABI) for 2013 show that, of a total of 102,384 claims submitted, 3,457 were declined, resulting in a 97% payout rate.

The ABI’s figures cover terminal illness, critical illness, total and permanent disability (TPD), whole of life and individual income protection products.

The highest declined percentage was in TPD, where 253 of 669 claims, or 38%, were turned down. At the other end, 38 of 43,529 whole of life policies were denied, or 0.1%.

According to the ABI, initiatives such as its code of practice on non-disclosure have led to a fall in the percentage of claims declined from 8% in 2007 to 3% in 2013, as customers have “become much more aware of which information they need to share with their insurer”.

Aegon UK protection director Dougy Grant said the figures are at odds with the public’s perception of protection insurance.

“The figures… shatter the illusion that insurance companies don’t pay claims and demonstrate how important it is to have cover in place,” he said. “People should continue to be encouraged to think about their protection needs and whether they can afford to leave their families unprotected.”

Grant said research Aegon conducted last year identified a lack of confidence in providers to pay claims as one of the key barriers stopping people from buying protection.

It found that 63% of the respondents who would consider taking out a protection policy were concerned by whether or how much they would pay out and 41% of the respondents who would not consider protection policies cited a distrust in providers paying out as the main barrier to purchasing a policy.

The ABI’s data, published on Tuesday, showed the insurance industry pays out £8.4m every day in individual life, critical illness and income protection insurance claims.