For most of us, 2020 was not a great year – it was, at the very least, a boring one. If there is one thing it certainly taught us, it’s how vulnerable we all are to financial struggles, even if we were fortunate enough not to have suffered. With COVID-19, many people were forced to realise how important it is to have financial protection in place should the worst happen.
Life insurance gives us the peace of mind we need to ensure that our families and loved ones will be financially supported when we are no longer there to provide for them. Other types of insurance may not have been so popular in 2020, but life insurance providers most certainly took the wheel in the insurance industry.
Life Insurance in 2020
According to the latest estimates, the Association of British Insurers expects their members as a collective to pay up to £2.5 billion for insurance claims related to COVID-19, £204 million of which will be paid out for life protection insurance.
Let’s take a look at some life insurance providers and how their payout figures changed between 2019 and 2020, most likely due to the coronavirus outbreak.
In 2020, LV= paid out 95% of individual protection claims totalling more than £118 million, a record amount. These claims, including life, income protection, and critical illness policies, supported over 9,000 individuals and their families. The remaining 5% of claims were declined due to misrepresentation or not meeting their policy’s definitions.
Claims for Life Assurance policies, including claims for terminal illness, totalled nearly £72 million, with an average claim of £11,265 and the highest payout of £850,000. The top causes for these claims were cancer at 43%, heart-related illnesses at 17%, and COVID-19 at 11%.
Critical illness claims with LV= amounted to £28.3 million, with an average claim of £77,135, the highest payout of £500,000, and a total of £282,500 paid out for illnesses in children from new-born to 21 years of age.
Around 60% of claims (222) were for cancer, 10% for heart attack, and 8% for stroke.
Income protection claims to LV= amounted to almost £14.6 million, £2.5 million of which for new claims, paid out to around 1,000 individuals and their families, with an average total claim of £8,165, and a highest total claim of £337,929.
Around 22% of claims were for musculoskeletal issues, 18% for cancer, and 15% for mental health issues. Mental health specifically totalled £4.9 million with new and existing claims.
LV= also paid out £2.6 million in Personal Sick Pay to the self-employed, with an average total claim of £1,599 and the highest total claim of £16,824.
Claims specifically related to COVID-19 totalled £6.5 million in 2020, with 619 death claims (10% of all death claims) and 255 income protection claims.
As a result of Covid-19, LV= expects claims for cancer and mental health issues to rise in 2021 and the need for online health and welfare services to increase.
In just the first half of 2020, Zurich UK paid out more than £154.2 million in life insurance claims, increasing from £140 million in 2019 to support more than 3,200 individuals and their families. Over £15 million of these claims were related to Covid-19.
Zurich paid out 99% of around 2,100 life insurance claims that were received in the first half of 2020, amounting to over £108 million alone. This is an increase from 1,980 life insurance claims in the first half of 2019, amounting to £97.2 million.
86% of critical illness claims were paid out to 561 policyholders by Zurich in the first half of 2020, totalling £42.4 million. In 2019, 570 policyholders claimed during this time, with a lower total payout of £38.6 million.
These claims’ main causes were cancer at 62%, heart attack at 9%, stroke at 4%, and multiple sclerosis at 3%.
Claims that did not receive a payout were due to misrepresentation or not meeting the definition of the critical illness as outlined in their policy.
Zurich paid out for 100% of new income protection claims in the first half of 2020, around £3.3 million per month. In 2019, during this same period, only 85% of new claims were paid out, at £3.7 million per month.
Around 29% of claims were for musculoskeletal disorders, followed by mental health issues and cancer.
In just the first half of 2020, AEGON found that life insurance claims due to respiratory issues increased from just 7% in 2019 to more than double at 16%.
During this time, AEGON paid out 95% of critical illness claims (a slight increase from 94% in 2019) and 96% of life insurance claims (the same as 2019).
Legal & General
Between 1 March 2020 and 1 December 2020, Legal & General paid out to 99% of claimants, totalling £42.8 million for life insurance claims due to COVID-19. The remaining 1% was declined due to misrepresentation.
In 2020, Royal London paid out £13.1 million in Covid-19 related claims, providing support for 2,110 policyholders. As death claims, 2,049 of these were paid out on Whole Life policies and 61 on Term life policies.
How does COVID-19 affect your ability to get life cover?
You are still able to buy life insurance, and even new policies will cover coronavirus. The biggest change is insurance companies have now added questions to their applications specifically related to coronavirus.
They may postpone your application if you have tested positive or have symptoms, but this is likely to only be for about one month, depending on the insurance provider.
If you have a pre-existing condition that makes you more susceptible to COVID-19, you may find it harder to qualify for a life insurance policy. There will still be options out there, but you will likely have to pay much larger premiums.
How to Ensure You Get the Right Payout
As you will have seen in the figures above, not all policies receive the payout they paid to receive cover for. While it’s impossible to know why policy claims were rejected beyond misrepresentation, it is clear that the number of claims that get rejected can be as high as 15%.
To ensure you’re within the 85%+ that receive a payout, it’s essential you have the right level of cover, understand your policy fully, and read the fine print. Legal & General had one of the highest payout rates, at 99%, so their process likely ensures all insurance buyers fully understand what they’re purchasing and the terms that must be met.
If you’re thinking about purchasing life insurance in the near future or already have a policy you are concerned isn’t right for you, we’re here to help. You can make the switch online to see if you can get a better policy, or you can talk to one of our friendly life insurance experts who will talk you through your options and ensure you fully understand your policy. We’re often cheaper than direct, and we’ll ensure that your policy suits your needs and will protect your family. To learn more, click here.