Table of Contents
- Issues in the Market
- Report Coverage
- Market definitions
- Abbreviations
- Market in Brief
- Insurers fail to narrow the life assurance gap
- Figure 1: The life assurance protection gap, 2002-06
- Some growth in 2006, but unlikely to be matched in 2007
- Figure 2: Volume and value of new individual regular-premium insurance
policies written, 2001-07
- Life insurance -- performance and outlook vary between sectors
- Figure 3: Number of new individual regular-premium insurance policies
written, by sector, 2001-07
- Term assurance expected to face a tough 2007...
- ...but there is an improved outlook for whole-of-life market
- Endowment sales continue to decline
- Legal & General and AXA Sun Life dominate market share
- Protection market displays increased innovation...
- ...but the legislative and regulatory landscape continues to change
- Channels of distribution continue to shift
- Mintel' s consumer research results highlight the extent of protection gap
- Figure 4: Ownership of life insurance and other protection products,
August 2007
- Lack of trust is major factor behind the protection gap
- Product Background
- Term assurance
- Figure 5: Overview of term assurance
- Level-term assurance
- Decreasing term assurance
- Whole-of-life insurance
- Figure 6: Overview of whole-of-life sector
- Two discrete areas
- Typical uses
- Tax planning uses and writing in trust
- Endowment insurance
- With-profits endowments
- Typical uses
- Dramatic fall from favour
- Broader Market Environment
- Key points summary
- Growth in PDI broadly positive but some caution required
- Figure 7: Trends in PDI, consumer expenditure, and savings, 2002-12
- Investment income boosts life insurer profits
- Figure 8: FTSE 100 and FTSE All Share -- daily movements, May 1997-June
2007
- Market performance affects demand for life protection products
- Population changes in target markets could affect demand
- Figure 9: Size of UK population, by age group, 1999-2011
- Increase in one-person households reduces need for life cover
- Figure 10: Total number of UK households and one-person households,
1991-2012
- Housing market slowdown to hit term assurance sales
- Figure 11: Number of UK property transactions, 1995-2007
- Opportunities to cross-sell life protection are declining
- Figure 12: Number of new loans from home purchase, including number of
loans for FTB, 1999-2006
- High house prices have both positive and negative implications
- Figure 13: Average house prices in the UK, 1970-2006
- Increased opportunities for IHT planning
- Figure 14: Estates liable for inheritance tax, 2000-04
- Internal Market Environment
- Key points summary
- The £2.3 trillion protection gap
- Figure 15: The life assurance protection gap, 2002-06
- Mortality rates continue to drop
- Figure 16: Age-standardised mortality rate for all causes in England &
Wales, by gender, 1906-2006
- Majority of deaths among the over-75s
- Figure 17: Age distribution of registered deaths in England & Wales, by
gender, 2006
- Heart disease and strokes remain the biggest killers in the UK
- Longevity continues to rise...
- Figure 18: Life-expectancy projections for people aged 65, by gender,
1987-2052
- ...but there is still pressure on margins
- Number of smokers gradually declining
- Figure 19: Cigarette smoking status in GB, by gender, 1991-2006
- Impact of the smoking ban
- Other medical issues affecting life insurance sector
- Genetic testing -- set for review in 2008
- HIV -- removing discrimination
- Influenza pandemic -- a reduced threat?
- Legislative and Regulatory Environment
- Key points summary
- Non-disclosure ' most important issue' facing the protection sector
- Law Commission proposes non-contestability period
- U-turn on Pension Term Assurance
- Regulatory update
- The abolition of the age 70 rule
- Changes to ICOB -- move to a principles-based regime
- Retail Distribution Review
- Risk-based approach could lead to changes in capital requirements for
insurers
- Treating customers fairly (TCF)
- Competitive Context
- Key points summary
- The evolution of the market
- Cost and apathy are key barriers in term assurance market
- Figure 20: Motivations and barriers to purchase for term assurance
policies
- Product popularity reliant on stockmarket performance
- Figure 21: Motivations and barriers to purchase for advice-based
whole-of-life policies
- Savings accounts compete with guaranteed-acceptance plans
- Figure 22: Motivations and barriers to purchase for
guaranteed-acceptance whole-of-life policies
- Strengths and Weaknesses
- Figure 23: Key strengths and weakness of the UK life protection market,
2007
- Unique product, scope to expand, innovation and falling rates...
- ...but a lack of trust, over-regulation, static market and too price-driven
- Market Size and Forecast
- Key points summary
- Slight growth in 2006, but unlikely to be matched in 2007
- Figure 24: Volume and value of new individual regular-premium insurance
policies written, 2001-07
- Life insurance -- performance and outlook vary between products
- Figure 25: Number of new individual regular-premium insurance policies
written, by sector, 2001-07
- Term assurance -- PTA led to 11% increase in sales in 2006
- Whole-of-life -- showing signs of growth
- Endowments -- decline to continue, albeit at a slower rate
- Value of new premiums falls as average policy value falls
- Figure 26: Value of new individual regular life insurance premiums, by
sector, 2001-07
- Term assurance -- market continues to contract
- Whole-of-life -- an improving market
- Endowments -- value of new premiums declines by 84% in six years
- Business in force stabilises
- Figure 27: Individual life insurance business in force at year-end, and
sums insured, by product type, 2001-06
- Forecast
- Figure 28: Forecast of the number of new regular-premium individual term
and whole-of-life policies written, 2007-12
- Term Assurance -- Growth recovery from the tightening of interest rates
- Whole-of-life -- Decline continues but at a slower rate
- Figure 29: Forecast of the value of new regular-premium individual term
and whole-of-life policies, at current and constant prices, 2007-12
- Term assurance -- an upturn in value, as volume sales increase
- Whole-of-life -- Value decreasing at a greater rate than volume
- Factors used in the forecast
- Segment Performance
- Key points summary
- Non-mortgage term sales boosted by performance of PTA in 2006...
- Figure 30: Mortgage-related and other term assurance as proportion of
total number of term assurance polices sold, 2001-06
- ...but subsequent U-turn on PTA will reverse the trend in 2007
- Whole-of-life market divided between volume and value
- Figure 31: Proportion of unit-linked and non-unit-linked whole-of-life
plans sold, by volume, 2002-07
- Guaranteed-acceptance plans boost the volume of the market...
- ...but unit-linked sales account for 53% of new written premiums
- Figure 32: Proportion of unit-linked and non-unit-linked whole-of-life
plans sold, by value, 2002-07
- Is the end in sight for the mortgage-related endowment sector?
- Figure 33: Number of endowment policed sold, mortgage-related and other,
2002-06
- Market Share
- Key points summary
- Legal & General holds 23% of the market share
- Figure 34: Life company rankings, breakdown of new regular-premium
business for all life insurance, 2004-06
- Legal & General tops market share for term assurance
- Figure 35: Top five providers of individual term assurance, based on new
business volumes, 2006
- AXA Sun Life accounts for 54% of whole-of-life market
- Figure 36: Top five providers of individual whole-of-life assurance,
based on new business volumes, 2006
- Companies and Products
- Market background
- Market Developments
- New entrants -- Insurers and providers
- New/changing partnerships
- Mergers and Acquisitions
- Company profiles
- Term assurance -- Major players
- Legal & General
- Norwich Union Life
- Whole-of-Life
- AXA Sun Life
- Brand Communication and Promotion
- Key points summary
- The importance of promotion
- Life insurance in top ten financial products in terms of adspend
- Figure 37: Advertising expenditure for all financial products,
2002/03-2006/07
- Half of total adspend on over-50s guaranteed-acceptance plans
- Figure 38: Advertising expenditure on life insurance products, by
sector, 2002/03-2006/07
- AXA Sun Life has been leading advertiser since 2004
- Figure 39: Advertising expenditure by top 15 advertisers of life
insurance, 2002/03-2006/07
- Direct mail accounts for 55% of adspend
- Figure 40: Advertising expenditure on life insurance, by media type, 2007
- Recent developments
- Channels to Market
- Key points summary
- Key sales channels
- Single-tie sales lose ground in mortgage-related term assurance market
- Figure 41: Distribution of value share mortgage-related term assurance,
by channel, 2000-06
- IFAs dominate the non-mortgage-related term assurance market
- Figure 42: Distribution value share of non-mortgage-related term
assurance, by channel, 2000-06
- Both IFAs and direct providers strengthen position in WOL market
- Figure 43: Distribution value share of whole-of-life premiums, by
channel, 2000-06
- Bancassurers continue to gain market share
- Figure 44: Proportion of life protection business obtained through
bancassurance, 2005 and 2006
- FSA survey reveals sales channel can affect persistency rate
- Purchasing distribution to assure future
- Insurer/broker acquisitions in 2006/07:
- The Consumer -- Product Ownership
- Key points summary
- Four in ten people have no protection products
- Figure 45: Ownership of life insurance and other protection products,
August 2007
- Term assurance accounts for two thirds of all individual life policies
- Figure 46: Ownership of life insurance, by product type, August 2007
- Implications and opportunities
- Half of adults aged 35-44 have life insurance
- Figure 47: Ownership of life insurance and other protection products, by
gender, age, socio-economic group and gross annual household income, August
2007
- Implications and opportunities
- Marriage increases likelihood to have life protection
- Figure 48: Ownership of life insurance and other protection products, by
marital status, lifestage, age of children in household and working status,
August 2007
- Implications and opportunities
- Mortgage ownership is major determinant in protection market
- Figure 49: Ownership of life insurance and other protection products, by
household tenure, TV region, technology users and newspaper readership,
August 2007
- Implications and opportunities
- Four in ten mortgagors have term assurance
- Figure 50: Ownership of life insurance and other protection products, by
mortgage ownership, August 2007
- Implications and opportunities
- CHAID analysis
- Figure 51: Key targets for life and other protection products, August
2007
- Implications and opportunities
- Figure 52: The differentiation in penetration between overall population
and highlighted target groups, August 2007
- Two thirds of people with one protection policy have life insurance
- Figure 53: Ownership breakdown, by number of protection products types
owned, August 2007
- Implications and opportunities
- 56% of people aged 25-34 have no protection products in place
- Figure 54: Ownership breakdown, by gender, age, socio-economic group,
lifestage, gross annual household income and housing tenure, August 2007
- Implications and opportunities
- The Consumer -- Arranging Protection and Financial Planning
- Key points summary
- Four in ten people took expert advice when arranging life insurance
- Figure 55: Arranging life insurance, August 2007
- Implications and opportunities
- Socio-economic group governs likelihood to seek advice
- Figure 56: Method used to arrange life insurance, by gender, age and
socio-economic group, August 2007
- Parents are more likely to seek expert advice
- Figure 57: Method used to arrange life insurance, by marital status,
lifestage, age of children in household and housing tenure, August 2007
- Implications and opportunities
- Internet usage is not reducing demand for advice
- Figure 58: Method used to arrange life insurance, by working status,
technology users, Internet usage and newspaper readership, August 2007
- Implications and opportunities
- Three quarters want to ensure their dependents are financially secure
- Figure 59: Agreement with statements concerning financial planning
matters, by life insurance policyholders and non-life insurance subscribers,
August 2007
- Implications and opportunities
- Over-65s are the most concerned about financial planning
- Figure 60: Agreement with statements concerning financial planning
matters, by gender, age, socio-economic group and gross annual household
income, August 2007
- Implications and opportunities
- A quarter of retirees are considering taking IHT advice
- Figure 61: Agreement with statements concerning financial planning
matters, by marital status, lifestage, age of children in household and
working status, August 2007
- Implications and opportunities
- Broadsheet readers are more likely to consider financial planning issues
- Figure 62: Agreement with statements concerning financial planning
matters, by housing tenure, TV region, technology users and newspaper
readership, August 2007
- Implications and opportunities
- 54% of life insurance policyholders do not have a will
- Figure 63: Agreement with statement ' I have made a will' , by ownership
of life protection and other protection products, August 2007
- IHT not a priority for protection product holders
- Figure 64: Agreement with the statement ' I have taken/am considering
taking advice about inheritance tax planning' , by ownership of life
insurance and other protection products, August 2007
- Two thirds without protection agree that it is important
- Figure 65: Agreement with the statement ' It is very important to me that
my dependents are financially secure in the event of my death' , by ownership
of life insurance and other protection products, August 2007
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