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Workers urged to take out protection cover as insurers pay £6.85bn in claims

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Individual policies alone paid out 287,000 claims on life insurance, income protection and critical illness last year, worth a total of £4.64bn.

When group and individual insurance payouts are calculated together, British policyholders who had issues with illness, injury or bereavement received £6.85 billion from claims in 2022.

That’s according to new figures from the Association of British Insurers (ABI), an industry group, and Group Risk Development (Grid), which works to increase the use of corporate group protection benefits.  

The average claim that was paid rose for the third consecutive year, from £14,931 to £15,448. Employer group policies paid out £2.21 billion in claims. 

Nearly 16,000 people filed individual income protection claims last year. That amounted to a 9% rise over the previous year. The value of claims rose by 22%, £231 million going to those who were unable to work.    

The primary drivers of individual income protection claims for the second straight year were musculoskeletal issues such as neck and back pain, comprising 34% of payouts.   

Covid-related claims fall 64%

The knock-on effect of the Covid pandemic appeared to have largely abated and now account for just 1.3% of all protection claims paid. Individual Covid claims declined by 64%, from 10,606 in 2021 to 3,846 in 2022 and a corresponding drop of more than 70% in their total value, to £71 million. (On average, a Covid claim paid £17,434.)  

Not all claims were paid. In more than half of those that were denied, insurers said it was because the customers had not shared key details about themselves or their circumstances when they first signed up for insurance.    

Rebecca Deegan, head of protection and health for ABI, said: “When you suffer a loss, fall ill or are badly injured, the last thing you want to be worrying about is your finances, especially during a cost-of-living crisis. That’s why the security that protection products can provide is so important.

“With another year of bumper figures and the vast majority of these claims being paid, it’s encouraging to see that individuals and their families continue to be supported through insurance.” 

A variety of policies

There are several types of policies for shoppers to consider. To name a few, for example, a critical illness policy generally pays a lump sum if a policyholder is diagnosed with a specified illness, such as cancer.

A total permanent disability plan pays a lump sum, or lifelong payments, to a policyholder who becomes permanently disabled.  An income protection policy is designed to help fill income gaps if injury or illness means a person cannot work.