The chief executive of the Social Security Agency defended the Incapacity Benefit reassessment process, despite 63% of people appealing the decision to reject their applications, on 29 March 2012.
Tommy O'Reilly said that out of 2,202 people who had the benefit disallowed, 1,368 had appealed.
Of the 247 appeals heard so far, in 40% of the cases the appeal was successful for the claimant.
"The appeal system is working well, it is delivering what it is supposed to do and these numbers are not higher than we would have expected," Mr O' Reilly said.
Mickey Brady, deputy chair of the social development committee, said it was "not a satisfactory situation".
"Nobody is disagreeing with the principle of getting people off benefit - particularly long-term benefit - back into work, but is how that process is done," he said.
Incapacity Benefit reassessment is one of the biggest changes to the welfare system in a generation.
It is now known as the Employment and Support Allowance.
Those found fit for some form of work will receive slightly more than £90 per week and be classified in a Work Related Activity Group.
That means they will be given some help and support to find a suitable job.
People assessed as unfit to work and they are placed in what is called the Support Group. These are people who have conditions like cancer or have severe learning difficulties.
They will be paid £99 per week and face annual reassessment for their benefits.
Mr O'Reilly said the focus was "on what people can do rather than what they can't do."
Department official Tony Murphy explained how the work capability assessment process was a "wide ranging" test consisting of 10 physical and seven mental, cognitive and intellectual descriptors.
Committee members also received a briefing from department officials on a consultation into irresponsible drinks promotions.