February 13, 2013
In their recent
Health & Protection Survey
, Drewberry Insurance finds that workers mistakenly believe that the UK's leading life insurers only payout around 50% of all claims made, which significantly underestimates the true payout rate of approximately 98% of claims.
Life insurance is an extremely important aspect of family financial planning but it is often argued by industry experts that the take-up rate is well below an optimal level, leading to a significant personal protection gap in the UK.
One explanation frequently proposed for this low take-up rate is that consumers are sceptical on insurers' willingness to pay valid claims.
A sample of 2,000 workers were asked to estimate what they thought the payout rate was for the UK's leading life insurers. The sample estimated the payout rate to be only 50% of all claims made, which would support the argument that consumers are distrustful of life insurers.
Life Insurance Payout Rate 96% Higher Than Workers Expected
In a sample of leading life insurers the actual payout rate in 2011 was closer to 98% of all claims made.
This means that the actual payout rate for life insurance is about 96% higher than what consumers think it is.
, Head of Protection at Drewberry Insurance, says,
It is often the case that clients are worried that insurers have a bad reputation for paying claims but these findings are far more concerning than I expected.
A considerable amount of work needs to be done to inform and reassure the general public that life insurance has an excellent payout rate
with all valid claims being paid, which should help to build confidence not only in life insurance as a product but also in the insurance industry as a whole."
Mortality Risk 7x Higher Than Workers Expected