Life insurers told to speed up bereavement policy payouts

Life insurers must process bereavement claims faster, the financial regulator has said after finding that some of the biggest providers are taking up to four months to pay out to their customers.
A review by the Financial Conduct Authority found that the biggest life insurers on the market took between 53 and 122 days to process a claim from start to finish for a “term insurance” policy. This is an agreement under which the life insurer pays a lump sum if the policyholder dies within a pre-agreed period of time.
For group life cover, which is provided through an employer, the firms processed claims within 36 days on average. Over-50s claims took within 20 days and whole-of-life claims were processed within 53 days on average. Whole of life cover applies to the policyholder’s full lifetime and can be used to meet future liabilities such as inheritance tax.
The FCA found that term insurance claims typically took longer to process because the sums were often higher and therefore likely to face more rigorous checks such as requests for medical evidence.
Matt Brewis, of the regulator, said: “The loss of a loved one can be intensely stressful and we expect firms to offer the right support to help their customers during this difficult time.
“We expect all life insurers to act on our findings and avoid unnecessary delays with claims.”
The review was based on data from the 15 life insurers that account for more than three quarters of the life protection market. Most of the firms reported that they faced challenges in recruiting and retaining experienced staff, particularly claim assessors. The FCA found that a combination of people leaving the industry, flexible and remote working, and a more competitive labour market had left many firms “short of experienced resource”.
Last year the authority issued a warning letter to the life insurance industry raising concerns around poor customer service, particularly with regard to slow transfer and claims settlement times. The regulator said that it would engage with the industry to improve customer outcomes and address the findings.
Life insurers paid out more than 250,000 claims in connection with group and individual protection policies in 2022. The industry managed more than £2 trillion of assets across more than 90 million policies that year.
Life insurance premiums are rising across the world, thanks to a combination of ageing populations, higher interest rates and a growing middle class in emerging markets. However, a report by the insurance giant Swiss Re found that premiums were expected to grow by 2.7 per cent across the world in 2025 and 2026, below the long-term trend of 3.7 per year from 2014 to 2023.