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The Actuary The magazine of the Institute & Faculty of Actuaries

Bereaved to receive life insurance payments more quickly

Dependents will be able to receive life insurance payments just four weeks after a bereavement, compared with the current four-month process, under new guidelines issued by the Association of British Insurers (ABI).

Under the new system the life insurer will ask the main beneficiary to complete 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.

Over 32,000 life insurance claims are made by families who have lost a loved one every year in the UK, many of which will now be able to benefit from this change.

The insurance industry recognised that financial hardship can arise due to the lengthy legal process associated with winding up a deceased person’s estate, the ABI said. Working with the Law Commission, a solution was found to get around the legal process to ensure a beneficiary can access a life insurance payout quickly and therefore avoid any unnecessary financial stress.

Otto Thoresen, the ABI’s director general, said: "Dealing with bereavement is hard enough, without the added stress of worrying about money. This new life insurance claims process means the time it takes on average to receive a payout will drop from four months to just four weeks. We believe that this will go some way to alleviating financial hardship for a deceased person’s dependents, especially families on lower incomes who have few other assets available to rely on."