Life insurance industry improves pay-out speed
Life insurance payments will be made within four weeks rather than taking up to four months, under new guidelines published yesterday by the insurance industry.
Insurance policy beneficiaries and dependants will be able to cut through legal red tape by signing a declaration where they agree to pay back any money they receive from the policy if the legal process decides they were not the rightful recipient.
The change will help the 32,000 bereaved families forced to claim against life policies each year. Probate law traditionally holds up pay-outs until the beneficiaries are clearly identified, but under the new guidelines those people named on policies will be able to get at their cash in a tenth of the time it previously took. The exception will be life policies held in trust, which will still require dependants to jump through legal hoops before being paid.
Otto Thoresen, the director-general of the Association of British Insurers (ABI), said the change has been made after the industry recognised that financial hardship could arise due to the lengthy legal process associated with winding up a deceased person's estate. The ABI worked with the Law Commission to find a solution to get around the legal process to ensure a beneficiary can access a life insurance pay-out quickly.
"Dealing with bereavement is hard enough, without the added stress of worrying about money," Mr Thoresen said. "We believe this new life insurance claims process will go some way to alleviating financial hardship for a deceased person's dependants, especially families on lower incomes with few other assets available to rely on."
The process has already been successfully piloted by three major firms, Aviva, Legal & General and Scottish Widows. All life insurers have now adopted the policy.
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