Life insurance providers have been instructed by the Financial Conduct Authority (FCA) to accelerate their bereavement claims processing after discovering major providers were taking up to four months to settle payments.
The regulatory review, examining 15 insurers representing over 75% of the life protection market, revealed processing times ranging from 53 to 122 days for term insurance policy claims. Term insurance, which provides a lump sum payment upon death within an agreed period, showed significantly longer processing times compared to other insurance types.
Group life cover, typically offered through employers, demonstrated more efficient processing with an average of 36 days. Over-50s claims were settled within 20 days, whilst whole-of-life claims took approximately 53 days to process.
The FCA attributed the extended processing times for term insurance to higher payment amounts requiring more thorough verification, including detailed medical evidence checks. Matt Brewis from the FCA emphasised the importance of appropriate support during bereavement, stating that insurers must avoid unnecessary delays.
Staff shortages emerged as a significant factor in delayed processing times. Insurance firms reported difficulties in recruiting and retaining experienced claim assessors, citing industry departures, remote working arrangements, and an increasingly competitive labour market as key challenges.
The life insurance sector processed more than 250,000 claims related to group and individual protection policies in 2022, managing assets exceeding £2 trillion across over 90 million policies. Despite rising premiums globally, driven by ageing populations and higher interest rates, growth projections remain below historical averages, with worldwide premiums expected to increase by 2.7% in 2025 and 2026.
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