FCA review finds long delays in life insurance payouts

The Financial Conduct Authority (FCA) has called on life insurers to improve how they handle bereavement claims after a review of 15 unnamed insurers, representing more than 75% of the market, uncovered significant delays and inconsistencies¹. The review found that some families face waits of up to four months for payouts, potentially leaving them without funds to cover urgent expenses¹.

The FCA found that only a few firms were able to provide end-to-end journey times for each type of life insurance product; the rest could only provide a figure for some products, or an overall figure across all products¹. Where accurate claim processing times could be established by product, these varied widely by policy type¹:

Term insurance claims take the longest to settle, often stretching between 53 and 122 days, because these policies usually involve higher payouts, which means insurers carry out stricter checks, including requests for medical records¹. 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 was not included in the reported data, which could explain the apparently shorter processing times¹. Delays can also be caused by waiting for key documents such as death certificates, probate paperwork or medical evidence¹.

The FCA found that many insurers struggle to monitor how well they handle bereavement claims, noting 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 taken¹. 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 year¹. The FCA also highlighted that even when insurers met their benchmarks, these standards were often set too low to deliver good outcomes for bereaved families¹.

The FCA highlighted that all insurers it 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 processed¹.

Why it matters for households

Delays in life insurance payouts can leave families without the funds they need to cover urgent expenses, such as funeral costs or everyday bills, and waiting weeks or even months for a claim to be processed can also take an emotional toll¹. The processing times reported by the FCA apply to claims on policies already in force, so the practical effect falls on the relatives of someone who has died and who are waiting on a payout. Households with term life insurance, often taken out to cover a mortgage or other significant debts, face the longest reported waits of 53 to 122 days, while claims on guaranteed over 50s plans were typically processed within 20 days¹. Payouts are tax-free and can be placed in trust to avoid inheritance tax and speed up access to funds¹.

If a claim is being handled poorly, the insurer has up to eight weeks to respond to a written complaint, and if the response is unsatisfactory or does not arrive within eight weeks, the complaint can be escalated to the Financial Ombudsman Service, which is free and impartial¹. More detail on complaining about an insurer is available.

What happens next

The FCA has said it will continue to monitor progress and take action if improvements are not made¹. No further dates or deadlines have been reported.