Insurers declined 14% of income protection claims in 2011

Insurers paid out 85.6% of income protection claims in 2011, the first statistics of its kind from the Association of British Insurers (ABI) reveal.

Insurers have been publishing percentages of declined and paid claims for critical illness (CI) since 2005, while the ABI has also published claims stats for the CI industry as a whole for several years. There have long been calls for a similar approach for IP in order to improve transparency and consumer confidence, but thus far only a number of insurers have published their own IP statistics, and the ABI has never done so.

But this week, included in its annual figures for CI and life claims, the ABI also published data on IP.

Its statistics show that there were 27,848 IP claims received in 2011, 23,844 of which were paid, equating to a pay out rate of 85.6%.

By comparison, 97% of life insurance claims were paid in 2011 and 92% of CI claims were paid, excluding claims for total and permanent disability (TPD). For all CI claims, including TPD, the pay out rate was 89%.

Stephen Gay, director of savings and protection at the ABI, said: “It is important that all insurance policies are clear so that customers are able to understand the circumstances in which they can make a claim.

“The ABI is always looking at ways to reduce the number of claims that are declined, for example because the customer has not provided all relevant information to their insurer, or has not understood that the claim they want to make is not covered by insurance.”

The ABI said that it is undertaking a review of the statement of best practice for IP to ensure the product is as simple as possible and is explained clearly to consumers to ensure they understand when they can make a claim, in order to increase the percentage of paid claims.

The introduction of guidance on non-disclosure by the ABI, as well as the publication of claims statistics, is generally credited with raising the proportion of paid CI claims from roughly 80% in 2006 to over 90% today.

But while the protection industry has certainly come a long way in improving CI’s reputation among consumers over the past few years, a recent report by Health Insurance into inconsistencies in the way providers report their statistics suggested there may still be more work to be done.