The latest statistics from the Association of British Insurers (ABI) show that £3.1bn was paid to 99,000 customers or families in 2013 as a result of a death, serious illness or injury.

Of a total of 102,384 claims submitted, 3,457 were declined, resulting in a 97 per cent payout rate.

The data covers terminal illness, critical illness, total and permanent disability (TPD), whole of life and individual income protection products.

Dougy Grant, protection director at Aegon UK, said the figures dismiss public concerns about payout rates.

“The figures released by the ABI today shatter the illusion that insurance companies don’t pay claims and demonstrate how important it is to have cover in place.

“People should continue to be encouraged to think about their protection needs and whether they can afford to leave their families unprotected. A loss of income through being unable to work, falling ill or a death in the family takes not only an emotional toll but a financial one too.”

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

It found that 63 per cent of respondents who would consider taking out a protection policy were concerned by whether or how much they would pay out

Meanwhile, 41 per cent who would not consider protection policies cited a distrust in providers paying out as the main barrier to purchasing a protection policy.