Table of Contents
OVERVIEW
EXECUTIVE SUMMARY
- The total regular premium life market contracted over the last five years
- Term assurance continues to be highly commoditized and easily sacrificed
by consumers
- Consumers do not perceive a great need for IP
- Providers should simplify the CII product to revive sales
- There have been bolder innovations from competitors in the protection
market
- Providers are expanding their distribution capabilities to capture more
market share
THE FUTURE OF THE PROTECTION MARKET
- The total regular premium life market has declined by a compound annual
rate of 4% over the last five years
- Sales of savings-related term see resurgence as the housing market
continues to negatively affect mortgage-related term
- IP sales saw a slight reversal in fortunes in 2008
- Sales of CII have declined as economic factors continue to weigh heavily
against writing new business
- Consumer caution regarding household financial stability saw an increase
in sales of whole-of-life insurance
- The rider market is a vitally important element of regular premium sales
- The regular premium life market will see a slight growth over the next
five years
- Datamonitor forecasts the regular premium life market to grow by a
slender 2% over the next five years
- Future sales of mortgage-related term will be impacted by the current
pessimistic housing market
- Sales of savings-related term are expected to rise as customers grow
more cautious over their finances
- IP will continue to have small market share
- CII sales will only recover once customer and advisor confidence in the
product is restored
- The collapsed customer demand for endowments will not see a reversal in
fortunes
- Providers are not impressing consumers enough about the need for protection
- Consumers are sacrificing adequate financial protection due to rising
personal debt
- Consumers believe they do not need protection
- Consumers also overestimate the cost of cover
- Consumers' mistrust of the protection industry is also fuelled by
negative press
- However, providers have given out most CI and IP claims to improve
consumer confidence
- ' Trigger' events in people' s lives induce significant protection behavior
- The protection gap still persists at £2.3trillion in the UK
- In times of falling mortgage markets, term assurance sales can be
bolstered by making the product more tangible for customers
- Providers need to focus on customers rather than price to boost term
sales
- In times of falling mortgage markets, term sales must be bolstered
through customer education
- Simplicity is key to regaining consumers' and advisors' trust in CII
- Many consumers and advisors have lost trust in CII
- Offering CII-lites may be an opportunity to reduce the cost of policies
and further capture consumers' interest
- The ongoing global financial crisis is also restricting new critical
illness business
- There is growing but wary interest in severity-based critical illness
among providers
- Providers should raise consumer understanding of the concept of protecting
income rather than an adherence to product design or way of writing business
- Insurers must work with the government and industry to increase consumer
appreciation for IP
- The Income Protection Task Force continues to raise advisor and consumer
awareness of IP
- Government welfare reforms will initiate the UK workforce to re-evaluate
how they protect their income
- Insurers should also consider offering hybrid products to meet a variety
of customers' needs
- The misfortune of rival products creates fertile ground to revive IP
sales
- Providers should continue to speed up underwriting of protection business
- More providers should implement tele-underwriting to speed up
applications
- Providers can offer either a ' small t' or ' Big T' tele-underwriting
service
- Tele-underwriting is an effective tool in reducing non-disclosure
- Different levels of tele-underwriting cause the customer experience to
differ with each provider
- Financial and medical underwriting can take a significant amount of time
THE FUTURE OF PRODUCT INNOVATION IN PROTECTION
- Providers have made further investment in tele-underwriting and the
increased disclosure it delivers
- Life companies have allocated more resources to advisors' extranet
capabilities and targeting more protection business
- Providers have increased the training available to advisors to help
maintain their market share
- Friends Provident has stated that it may offer protection policies on
wrap platforms
- The protection market is highly concentrated
- Legal & General writes the highest value of new business premiums in
term assurance and CII
- HSBC and Friends Provident dominate the IP market
THE FUTURE OF PROTECTION DISTRIBUTION
- Protection distribution remains focused on the IFA channel
- IFAs are the dominant distribution channel for protection products
- Advisors have a prime opportunity to revisit clients, increase consumer
awareness and change perceptions of protection
- Providers are broadening their online sales capabilities through
aggregator sites
- Aggregator sites challenge the protection distribution landscape
- Aggregator sites have become a trusted source of financial service in
the current climate
- Concerns and criticisms are being leveled at non-advised sales
- Problems are also arising between direct sales and advisor channels
- Protection products will increasingly be distributed through
non-intermediated channels over the next five years
- Protection products are expected to be increasingly distributed
direct-to-consumer
- Friends Provident is to partner with Tesco to extend the reach of its
protection product distribution.
APPENDIX
- Definitions
- Critical Illness
- Income Protection
- Term assurance
- ABI definitions of distribution channels
- Further reading
- Ask the analyst
- Datamonitor consulting
- Disclaimer
TABLES
- Table: Regular premium life market, new business premiums 2004 - 2008,
£m APE
- Table: Total regular premium life market adjusted for rider products, new
business premiums, £m APE
- Table: Forecasts regular premium life market, new business premiums 2009 -
2013, £m APE
- Table: Forecasts total regular premium life market adjusted for rider
products, new business premiums 2009 - 2013, £m APE
- Table: Term assurance new business premiums 2004 - 2008, £m APE
- Table: The top 20 term assurance competitors, new business premiums 2008,
£m APE
- Table: The top 20 CII competitors, new business premiums 2008, £m APE
- Table: The top 20 IP competitors by new business premiums, 2008, £m
APE
- Table: Regular premium life market, new business premiums segmented by
distribution channel, £m APE
- Table: Forecasts regular premium life market, new business premiums 2009 -
2013, £m APE
FIGURES
- Figure: The total regular premium life market has declined by 4% over the
last five years
- Figure: Premiums for CII written as a rider to term assurance see an
upturn in 2008
- Figure: The regular premium life market will grow by a slender 2% over the
next five years
- Figure: Consumers perceive protection insurance as either unnecessary or
unaffordable
- Figure: New business premiums for term assurance have declined by 4% over
the last five years
- Figure: PruHealth makes health insurance more tangible by rewarding
customers who lead healthier lives
- Figure: Legal & General dominates the term assurance market
- Figure: Legal & General commands top spot in the critical illness market
- Figure: HSBC and Friends Provident were the top IP insurers in 2008
- Figure: IFAs are the main distribution channel for protection products
- Figure: Online price comparison sites and banks are the most trusted
financial institutions
- Figure: Non-intermediated channels will gain market share from IFAs over
the next five years
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