Suicide claims more payouts

LIFE assurers are paying out 10 times more on suicides than they were 12 years ago, raising fears that the way policies are written may be encouraging people to kill themselves to ease their dependants' financial difficulties.

According to a report published today in Money Week, the payouts on suicide-related claims increased from pounds 4.3m in 1979 to pounds 44.6m in 1991. The number of claims rose from 908 to 2,218.

Contrary to popular myth, most life assurers pay out on suicides, partly because of pressure from building societies, which want to ensure that their endowment- linked loans are secure, even in cases of suicide.

The report is based on confidential statistics compiled by the Association of British Insurers. Of 102 life offices that responded, only 40 had suicide exclusion clauses, preventing automatic payouts on suicides.

And of these 40, most only outlawed suicide claims for the first 12 or 13 months of the policy. Thereafter the heirs of people who commit suicide can still claim.

Life offices with exclusion clauses paid out pounds 2.6m on suicides in 1991, compared with pounds 42.1m paid out by life offices with no exclusion clauses.

According to Tony McMahon, features editor of Money Week: 'It would appear that people are killing themselves because of the absence of suicide clauses.

'It does look like they are targeting life assurance offices where there is no suicide clause.'

Many large insurers have no suicide clauses, including Royal Life and Equity & Law. Royal Life has launched an internal inquiry into claims on suicides. It fears economic hardship is fuelling the increase.

According to Icki Iqbal, chief actuary of Royal Life: 'We believe is it recession-related. As a life office specialising in mortgage products, we will be interested to know if the strains of over-borrowing drive some to suicide.'

The ABI asked life offices for details of their suicide exposure in July last year. Insurers with suicide clauses saw claims grow from 60 worth pounds 147,000 in 1979 to 196 worth pounds 2.6m in 1991. Insurers without suicide clauses saw claims grow from 846 worth pounds 4.1m to 2,022 worth pounds 42.1m.

The figures may understate the true size of the phenomenon. Because of the taboo over suicide, some coroners' courts are reluctant to bring in a verdict of suicide.

Some deaths judged 'accidental' or given open verdicts may in fact be suicides.