It is disturbing to see many customers are stopping their “living insurance” policy just before when the average claim is made, said life insurer TAL.
According to its latest statistics, the average age a person discontinues one or more of three types of living insurance policies – cover for disability, critical illness/trauma, and income protection – is at 45 years old.
However, the average aim for a claim is more than this: 46.5 years old. The analysis doesn’t included traditional life insurance where a lump sum is paid upon death.
The statistics demonstrate a disturbing trend of customers who are stopping their policies at a time when statistically they are most likely to need financial protection, said TAL CEO Jim Minto.
“We know that cost of living pressures are continuing to force people to rethink their domestic budgets but it is very unfortunate that those people who stop their policies for this reason do not see financial protection as essential for themselves and their families,” Minto said.
The average age a person takes up living insurance is 37.5 years, which means that the average lapse or discontinuance is 7.5 years later at 45 years of age and the average claim is made nine years later at 46.5 years of age.
Additional analysis of income protection only shows that half of all current claims for that category are made within 24 months of the policy being taken out (one in two), compared to a claim rate of 40% two years ago (two in five).
And, incredibly, the time between taking out income protection and making a claim is now 1.25 years shorter than it was just two years ago, reducing from almost six years to 4.7 years.
Minto said this new analysis underlines the industry trend for people to increasingly claim on their life insurance products, with TAL’s own total claim payout figure rising 45% last year to $843 million.
“The increasing rate of life insurance payouts being made is really good news because it demonstrates the value and need of life insurance in protecting customers and their families when they most need it but I do worry about those who stop their policies when they are most likely to need it,” Minto said.