Life Insurance Claims Statistics in Australia
Russell Cain Updated: 19 February 2020
One of the biggest concerns people buying life insurance has, is whether their policy will payout should they suddenly pass away or become sick or injured.
While a track record of claims paid is not the sole indicator of performance, it can be an important factor to consider when comparing companies and choosing a policy suited to your unique requirements.
The Australian Prudential Regulation Authority (APRA) recently released their 2019 life insurance claims and disputes statistics. These stats reveal the discrepancy between claims paid according to the type of cover you have and the distribution channel you choose: Direct vs Retail vs Group.
Important definitions:
Individually advised: Retail policies purchased via intermediaries, for example, comparison websites, insurance brokers or financial advisers.Individually non-advised: Direct life insurance policies purchased directly from a bank or insurance company via their website or over the phone.Group life insurance: A policy generally purchased via an employer or through a superannuation fund.
What types of insurance do Australians claim for?
In no particular order, the most popular types of life insurance available in Australia, usually include:
Death Cover
Pays a lump sum benefit to your nominated beneficiaries when you pass away or get diagnosed with a terminal illness. Generally, excludes suicide within the first 13-months.
Learn more.
Total and permanent disablement (TPD)
Provides a lump sum amount when totally and permanently disabled because of the injury or illness. There are generally 4 types of total and permanent disablement definitions: Own occupation, Any occupation, Home duties and Modified TPD (activities of daily living). Learn more.
Critical illnesses/Trauma cover
Pays a lump sum benefit if you are diagnosed with a critical illness listed in your insurerâs product disclosure statement (PDS). This policy can cover between 30 and 60 conditions. Learn more.
Income Protection
Pays you a monthly benefit of up to 75% of your regular income when you suffer a sickness or accident and are unable to work for longer than the waiting period. There are generally 3 types of income protection policy options: Indemnity Value, Agreed Value or Guaranteed Agreed. Learn more.
Accidental death and injuries
Generally, pays out a lump sum benefit, if you die or get injured due to an accident, caused solely and directly by violent, external and unexpected means. Learn more.
Funeral insurance
Pays a cash benefit to help your loved ones pay for your final expenses. Learn more.
What percentage of life insurance policies payout?
When comparing major life insurance brands in Australia, you might want to consider:
Claims accepted rate: The percentage of claims a company pays out of all the claims that went through to the final decision.Average claim time (months): How quickly a life insurance company responds regarding whether a claim is accepted or declined.Insurance BrandClaims accepted rate â Advised (Retail)Claims accepted rate â Non-advised (Direct)Average claim time (months) â Advised (Retail)Average claim time (months) â Non-advised (Direct)Industry average96.3%88.0%3.13.3AIA97.4%Not enough data2.3Not enough dataAMP97.5%Not enough data5.4Not enough dataCommInsure88.5%93.3%2.14.1MLC97.9%Not enough data2.45.4OnePath96.5%94.5%4.33.6Suncorp/Asteron97.2%88.0%1.93.1TAL98.4%72.8%0.93.1Westpac95.0%94.6%2.23.1Zurich96.3%94.3%1.42.4
Source: ASICâs Moneysmart Life Insurance Comparison Tool (APRA data from 1 Jan to 31 Dec2018 and ASIC 498 report).
Take note: The information above is for death cover and only includes the companies whose number of admitted claims was significant enough to provide a reliable result.
Claims admittance rate by cover type and distribution channel
Cover typeIndividual AdvisedIndividual Non-AdvisedGroup SuperGroup OrdinaryDeath96%88%98%99%TPD87%59%88%68%Trauma87%87%n/a100%Income Protection95%85%96%95%Funeraln/a99%n/an/aAccident19%82%n/an/a
Source: APRA Life Insurance Claims and Disputes Statistics (Released 27 June 2019).
The APRA data shows that there were a claims admittance rate of 93% across all types of distribution channels, with Individually Advised policies generally showing a higher admittance rate (96%) compared to Individually Non-Advised (88%).
The discrepancy in admittance rate could be because people that received some form of advice were better informed about what they were covered for, compared to the uncertainty of relying on your own research when purchasing insurance directly.
Advised policies are generally fully underwritten, as opposed to Non-Advised policies that are generally not underwritten or only partially underwritten at application time. Because of this, Direct policies can have a wide range of exclusions compared to insurance purchased via an intermediary (Advised).
The APRA report also provides the number of disputes lodged per 100,000 lives insured. A dispute refers to a claimant being unsatisfied with the insurerâs decision regarding their claim (for example the amount paid out or the claims process) and then registering their disagreement with the insurer, an external dispute resolution scheme, a Court or Tribunal.
Life Insurance dispute ratio by cover type and distribution channel
Cover typeIndividual AdvisedIndividual Non-AdvisedGroup SuperGroup OrdinaryDeath71617TPD30391527Trauma4214n/a22Income Protection1421912020Funeraln/a3n/an/aAccident319n/an/a
Source: APRA Life Insurance Claims and Disputes Statistics (Released 27 June 2019).
Possible list of reasons life insurance wonât pay out
The contractual definition is not met: A person submits a claim for an event that they think they are covered for but is not listed in their policyâs terms and condition. Exclusions: Some claims get denied due to a policy having exclusions built-in, for example, not covering pre-existing medical conditions or dangerous past-times. Non-disclosure: The unintentional non-disclosure or misrepresentation of information. Fraud: A person intentionally providing incomplete or false information when applying for a policy. Other reasons
Reasons for claims being declined (distribution channels are combined)
Cover typeContractual definition not metExclusion clauseUnintentional non-disclosure or misrepre
sentationFraudulent claimOther reasonsDeath50%36%6%2%6%TPD83%8%1%0%8%Trauma78%14%1%1%6%Income Protection61%20%9%1%9%Funeral39%50%0%0%11%Accident56%38%0%0%6%
Source: APRA Life Insurance Claims and Disputes Statistics (Released 27 June 2019).
5 ways to help make sure your claim gets paid
Understand what youâre buying: Make sure you carefully review your product disclosure statement (PDS). You might want to request the assistance of an insurance specialist. Comply with your duty of disclosure: Rather give too much information when applying for a policy, so the insurer can accurately assess your overall risk profile. In this way, youâll generally have more certainty that a claim will be paid under your policyâs terms and conditions. Try to obtain a fully underwritten policy: Be wary of insurerâs offering cover without you having to undergo underwriting. Pay your premiums: Make sure you have sufficient funds to pay your life insurance premium when itâs due to prevent your policy getting cancelled due to non-payment. Review your policy: Itâs essential to review your policy every year to make sure it still suits your requirements, especially after a significant life event. For example, buying a house, getting married, starting a family or retiring.
Lodging an insurance claim can be a complicated and frustrating experience. Life Insurance Direct clients have the support of our experienced insurance specialists, helping you with the claims process every step of the way. Give us a call on 1300 135Â 205 if youâre interested in becoming a client.
