Life insurance claims acceptance rates are a key metric for both life insurers and their customers. For insurers, they provide insights into the efficiency of their claims processes and the overall satisfaction of their customers. For customers, they provide an indication of how likely their claim is to be paid in the event of a covered event.
The Australian Prudential Regulation Authority (APRA) regularly publishes statistics on life insurance claims. We have excluded funeral insurance from the following analysis as it skews the data, concealing important trends impacting the primary life insurance products.
The latest data on Australian life insurance claims acceptance rates is explored in an interactive visual below.
Australian life insurance claims acceptance rates have been improving in recent years, with the overall acceptance rate reaching 94% in 2023. This is a positive development for the life insurance industry and for Australian consumers, and likely reflects the introduction of new industry standards and improvements in underwriting processes.
However, there is still some variation in acceptance rates across different distribution channels and benefit types. For example, claims from group and retail channels have higher acceptance rates than direct insurance claims. Similarly, death claims are more likely to be accepted than disability income (DI) or total and permanent disability (TPD) claims.
Claims acceptance rates by channel
APRA's statistics show that claims acceptance rates vary depending on the channel through which the policy was acquired. The claims acceptance rate for group life insurance is the highest (95.4%), followed by retail advised (92.7%) and direct channels (87.9%).
This is likely due to the fact that group life insurance policies are typically underwritten on a group basis, which means that insurers have less risk associated with each individual policy. Retail advised policies may have lower claims acceptance rates due to the fact that they are typically more complex and may involve higher risk individuals. Direct policies may have lower claims acceptance rates due to the fact that insurers have less information about policyholders.
Claims acceptance rates by benefit
The claims acceptance rate also varies depending on the type of benefit that is being claimed. The claims acceptance rate for death benefits is the highest (97.6%), followed by DII (95.8%), CCI (93.5%), TPD (91.7%), trauma (87.2%), and accident benefits (83.6%). This is likely due to the fact that death claims are typically easier to verify and document than other types of claims. DII claims also tend to have high acceptance rates, as insurers have a financial incentive to approve claims and get policyholders back to work as quickly as possible. TPD claims can be more difficult to assess, as insurers need to determine whether the policyholder is permanently disabled and unable to work in any occupation. Trauma and accident claims may also be more difficult to assess, depending on the specific circumstances of the claim. CCI claims typically have high acceptance rates, as they are typically well-defined and easy to verify.
Insights for life insurers
The data on life insurance claims acceptance rates can provide a number of insights for life insurers. For example, insurers can use the data to:
- Identify areas where their claims acceptance rates are lower than the industry average. This information can then be used to improve their claims handling processes and reduce the number of claims that are denied.
- Benchmark their performance against other insurers. This can help insurers to identify areas where they are performing well and areas where they need to improve.
- Develop targeted marketing and product development strategies. For example, insurers could develop products specifically for groups that are more likely to have their claims denied.
Conclusion
Life insurance claims acceptance rates are an important metric for both life insurers and their customers. By tracking market trends and using predictive analytics, life insurers can improve their claims handling processes, reduce the number of claims that are denied, and benchmark their performance against other insurers.
Data sourced and adapted from APRA's Life Insurance Claims and Disputes Statistics, licensed under the Creative Commons Attribution 3.0 Australia Licence.
