"In 2023, ABI reported total sales of IP of 247,000, with 57,000 new policies (or 22% of the total) sold by AFM members."
- Andrew Whyte, CEO of AFM
In 2023, members of the Association of Financial Mutuals (AFM) paid over £70mn (7k customers) in claims – this is £18mn higher than 2022. This increase is partly due to Wesleyan Assurance re-joining the association, but even on a like-for-like basis, the volume of claims was 6% higher than the previous year.
Notably, AFM members that offer Income Protection (IP) products now account for roughly 60% of claims on individual IP policies (i.e. excluding group business), despite holding only 15% of policies. AFM highlighted that “commitment to paying claims is leading to strong demand for mutual products.”
The most common reason to claim was musculoskeletal (38%) but there was a sharp increase in mental health-related claims (11% vs 8%), of which 90% were for stress, anxiety, and depression. PTSD and eating disorders were most costly, averaging £56k per claim.
The average timeframe for IP claims was sixty-eight weeks, but nearly a quarter of claims have been running for over five years. The average payout for IP policies was just over £10k, while 600 customers received rehabilitation support.
Only 7.9% of claims were rejected, usually due to undisclosed information at the point of application or claim (54%); 26% of rejected claims didn’t meet the definition of disability.
“According to the Financial Conduct Authority’s (FCA) Financial Lives survey, 6.1% of the population hold an IP policy. AFM members are becoming increasingly important part of the market, managing around 400k policies at the end of 2023, just under 15% of the market, but they accounted for over 60% of all claims paid to individuals,” said Andrew Whyte, CEO of AFM.
He believes mutual’s influence will continue to grow; “Affordable premiums and a greater likelihood of paying a claim are key reasons in the growth of the mutual market.”
Responding to these claims figures, Nikki Hargreaves, Senior Claims Manager at Shepherds Friendly, said “Our mutual ethos means we focus on supporting our IP members when they need us most. IP is arguably the most important financial product a person can have and our focus on paying claims has meant valuable financial support at a very difficult time.”
