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Life insurance is designed to provide peace of mind, but a regulator review has revealed that some families face waits of up to four months for payouts, potentially leaving them without funds to cover urgent expenses.
Following its findings, the Financial Conduct Authority (FCA) is calling on insurers to improve how they handle claims and ensure families are properly supported during the process.
Here, Which? breaks down the findings, explains how to complain if you have a problem and signposts how to choose the right life insurance policy for you.
The FCA’s review of 15 unnamed life insurers, representing more than 75% of the market, uncovered significant delays and inconsistencies in bereavement claims handling.
Our table explains the different types of policy and the average processing times ordered by the shortest to longest.
| Policy type | What it is | Average processing time |
|---|---|---|
| Guaranteed over 50s plans | For those aged 50 and over, offering guaranteed acceptance without a medical exam. They provide a fixed payout, often used towards funeral costs or as a financial gift. | 20 days |
| Group life cover | This type of insurance is provided by employers as part of an employee benefits package. | 36 days |
| Whole of life insurance | Provides lifetime coverage, paying out when the policyholder dies. Often used to meet future liabilities such as inheritance tax. | 53 days |
| Term insurance | This policy provides coverage for a specified term, such as 20 years. It's often used to cover significant debts such as mortgages. | 53-122 days |
Term insurance claims take the longest to settle, often stretching between 53 and 122 days. These policies usually involve higher payouts, which means insurers carry out stricter checks – including requests for medical records – which can slow the process down.
Whole-of-life insurance claims can vary depending on their purpose, with older policies involving smaller payouts often processed faster as they are less likely to need medical evidence.
Group life cover claims are quicker, averaging 36 days, but involve an extra step as claims must go through the employer before reaching the insurer. According to the FCA, most firms said this employer-handling time wasn’t included in the reported data, which could explain the apparently shorter processing times.
More generally, delays can also be caused by waiting for key documents like death certificates, probate paperwork, or medical evidence.
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Delays in life insurance payouts can leave families without the funds they need to cover urgent expenses, such as funeral costs or everyday bills.
Waiting weeks or even months for a claim to be processed can also take an emotional toll.
The FCA highlighted that all insurers they spoke to offer a form of additional support to claimants and relatives of the deceased, such as bereavement counselling or estate administration support, although access to these services often depends on the type of policy held. And many offer funeral pledge schemes, which release funds for funeral costs while the claim is still being processed.
The FCA found that many insurers struggle to monitor how well they handle bereavement claims. It noted that some firms split the claims process into separate stages, such as steps managed by external providers, making it harder to track the overall time taken.
In some cases, insurers failed to meet their own service standards over extended periods, with some reportedly failing to meet several of their own standards for up to a year.
The FCA also highlighted that even when insurers met their benchmarks, these standards were often set too low to deliver good outcomes for bereaved families.
The FCA has urged insurers to address delays in claims processing and ensure families are better supported during bereavement. It warned that it will continue to monitor progress and take action if improvements aren’t made.
If you’re unhappy with how your life insurance claim is being handled, here’s what you can do.
Find out more: how to complain about your insurance provider
Choosing the right life insurance policy can help ensure your family is financially secure if the unexpected happens.
Payouts are tax-free and can be placed in trust to avoid inheritance tax and speed up access to funds.
The best policy for you will depend on your circumstances. Whether you’re taking out a mortgage, starting a family or planning for inheritance tax, factors such as your age, health and lifestyle will also affect the cost of cover.
Which?’s life insurance guides provide practical advice to help you compare options and find a policy that suits your needs.
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