Annual Life Insurance Claims Pass $9 Billion for First Time

The life insurance sector has continued to reach record levels of claims being paid with new data revealing claims payments during 2016 passed the $9 billion mark for the first time.

The Risk Store Managing Director, Pete Wincott

The Risk Store Managing Director, Pete Wincott

This level exceeds the $6 billion paid in 2015 and is the 11th consecutive year that claims payments have climbed, according to online life insurance resource provider The Risk Store.

The Risk Store Managing Director, Pete Wincott, said the daily claim amount paid was more than $26 million and the number of claimants at 108,000 was also a record, increasing by nearly 20,000 over the 2015 figure of 89,300 claimants.

Wincott said the figures, released as part of The Risk Store’s annual Australian life insurance industry claims paid statistics, highlighted the importance life insurance played in protecting Australian consumers and contributing to society.

…the daily claim amount paid was more than $26 million and the number of claimants at 108,000 was also a record…

“Despite the continuing mainstream media scrutiny of the Australian life industry’s claims handling, claims payments during 2016 exceeded the previous year significantly, with a total of over $9 billion dollars,” Wincott said.

“A record number of claimants received benefits and this is from only the key mainstream insurers. The full total including smaller niche players is therefore even more in both dollars and numbers,” he added.

Wincott said the statistics have also recorded for the first time the largest benefit amount paid for each product type and the oldest and youngest claimant paid for each product type, with the latter being a two year old.

“We hope these statistics provide encouragement to those people working within the industry, that their role does in the end make a significant difference to so many people’s lives, directly and indirectly,” Wincott said.

  • Warren B

    Pete, you mention the full total including smaller niche players is even more….are the smaller niche players the direct insurers or are they included in the “key mainstream players”? It would be interesting to see the percentage split between claims paid by direct insurers and claims paid where an adviser was involved!

    • Further to Sue’s post and in answer to the second part of your question, no direct figures: if advisers/clients choose to calculate average payments for a product (say term), all the smaller sums insured in self-directed policies would make the retail averages lower, putting advisers in danger of their clients getting the wrong message about ‘what other clients are buying’. We believe this skewing is not helpful so we don’t collect direct stats. Remember Warren, this PDF document is designed to assist getting consumers to understand the need and benefit of financially protecting themselves, their families and their assets. – Pete Wincott

      • Warren B

        Thanks Pete. As per my reply to Sue, I was looking at another way of exposing the low quality policies peddled by the direct insurers. Thanks for the article.

  • Sue Laing | the risk store

    Warren Pete will give you more detail but just to clarify: we can’t obtain decline vs paid % stats and have never been able to, so what you mentioned isn’t possible. It may be after ASIC/APRA sort out the compulsory reporting of meaningful claims stats over the next year or two, as mooted. Even then, the issue with direct is not that there isn’t an adviser involved, it’s the more restrictive cover and the frequent underwriting at claim time that leads to probable higher decline rates, so you wouldn’t be comparing apples with apples.

    • Warren B

      Sue, your last sentence is exactly what I was hoping to highlight – the underwriting at claim time for the direct carriers leads to probable higher decline rates. The point of course is that policies established with the help of an adviser have more chance of being paid! Thanks for the article, though.

  • Ben

    I would like to see a statistic (which im sure is unobtainable) which shows the percentage of TPD/IP claims paid to direct customers with/without the help of a lawyer and the average cost of hiring that lawyer to get that payment.

  • Andrew

    Thanks for another great article and these stats Pete et al. Can I just say that as a policy holder and Insurance Professional however, I find these figures frightening. In the current environment, I simply cannot see how results like this are sustainable.

    I wonder if it would be possible to overlay these figures with the growth in policy holders (not just movement around the industry but actual new, previously uninsured policy holders) and it would also be interesting to see this increase in claims statistics as a percentage against premium increases which have come under a lot of scrutiny lately. Without more policy holders to cover the claims pool, I fear we will continue to see more premium increases across the market. Unfortunately this is not the answer as increasing prices lead to shock and selective lapses and ultimately less policy holders funding more claims and then one day, less insurer’s covering less risk.

    As you have pointed out, the volume of claims numbers and payments speaks to the insurance need in Australia and the vital role that the industry plays in the economy and in supporting these families. Without the Insurer’s a good amount of this financial support would be the responsibility of the government yet whilst they should be doing all they can to support us, the self-serving regulation and inquiry that has been poured upon the industry in recent years is crippling. Worse still, in a goodly proportion of the time, it is the insurance sector making a rod for their own backs (eg the ‘code’ and a general lack of defending the immense good the industry does).

    Let’s not forget that the drivers of this unprecedented scrutiny were four (4) legitimately declined claims. The Insurer (and the industry) have since been cleared by independent and regulatory reviews and I’m truly shocked that this surprises some. Where were the mainstream media with the great news of the Deloitte findings? Adele Ferguson instead dismissed the findings and disregarded the report as cash-for-comment. How an industry class action against Fairfax has not been launched yet I will never know.

    Claims statistics like those in this article should be shouted from the rooftop and publicly acknowledged in mainstream media, even if we have to advertise it. I feel that the FSC should have more focus on this and in generally disseminating this type of information directly to the public instead of placating the loonies with politics and self-flagellation of the industry it is supposed to serve.