Life insurance claims paid ratios for individual advised and group super risk products have been trending downwards since December 2020, according to the Australian Prudential Regulation Authority (APRA).

However, the claims ratios for policies sold through individual non-advised and group ordinary channels continued to rise over time, the joint report from APRA and the Australian Securities and Investments Commission (ASIC) says.

The claims paid ratio is the dollar amount of claims paid out in the reporting period as a percentage of the annual premium receivable in the same period.

By cover types, the claims paid ratios for death and trauma declined steadily over time in the period from June 2018 to June 2022 while the ratios for total and permanent disability (TPD) and disability income insurance (DII) peaked in December 2020 before returning to a lower level of 70% to 80%.

The regulators’ latest Life Insurance Claims and Disputes Statistics report released last week also comes attached with an update covering the rolling 12-month period to June 30 for the 18 life insurers writing direct business excluding reinsurance.

Accident has the lowest overall claims paid ratio of 21% from policies sold through all four distribution channels – individual advised, individual non-advised, group super and group ordinary.

The claims paid ratio for death is 48%, TPD 73%, trauma 50%, consumer credit insurance (CCI) 30% and funeral 31%.

DII has the highest claims paid ratio, at 82%, calculated using an assumed 24-month payout period.

The report says a total of 7425 disputes were resolved during the reporting period, with TPD and DII making up the vast majority of cases, at 29% and 56% of the total respectively.

About 69% of disputed initial outcomes for CCI claims were reversed as they were determined to be incorrect, the highest out of the seven risk product categories.

Up next are TPD and DII, at 68% each, followed by death (56%), trauma (38%), accident (27%) and funeral (13%).

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