Individual payouts for protection policies rose 9 per cent last year, continuing on a three-year upward trend.
The value of an average protection payout now sits at £14,994, according to data published by the Association of British Insurers over the weekend.
In total, £1.6mn a day more was paid out over 2021 in individual and group life insurance, income protection and critical illness claims compared to the previous year, totalling £6.8bn.
Payouts for Covid-19 related individual claims almost doubled in 2021, reaching a collective value of £261mn, despite the number of claims paid remaining “almost identical” to 2020, the ABI said.
The trade body put this down to a 69 per cent increase in term assurance claims, where the average payment reached £69,760.
“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,” said ABI’s head of protection and health, Roshani Hill.
The rise in value of Covid-19 payouts is, according to Hill, “a stark reminder of the devastating impact the pandemic has had” on people in the UK.
She added: “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.”
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 |
|
Source: ABI
Despite the bumper increase in the value of individual protection claims, there was a 1.6 per cent drop in the total number of new claims paid.
The ABI credited this to more individual term assurance and critical illness claims, which have much higher values.
While term assurance claims rose significantly last year, individual protection claims fell by 14 per cent, from 17,000 to 14,600.
The ABI said the drop could have been as a result of “a number” of things, including more people still being on the government’s furlough scheme, higher unemployment levels, and insurers increasing their early intervention offerings in 2021 making it less likely for issues to reach the point of making a claim.
Of these 14,600 claims, the ABI said those for musculoskeletal conditions increased 40 per cent to 5,012 in 2021, as a result of the return of products with shorter deferred periods which had been stopped during the pandemic.
Alongside a drop in income protection claims, the ABI also recorded 20 per cent fewer mental health claims following what it had called “a significant rise” in mental health claims under individual income protection in 2020.
However, the trade body did say they are still higher than in 2019, suggesting that the pandemic continues to have an impact on the UK’s mental health.
'The message is getting through'
Almost one in 10 (9 per cent) British adults have considered taking out or taken out a protection policy such as life insurance, income protection and critical illness, rising to 17 per cent when looking at those aged 18-34.
