Income Protection - UK - January 2008

Table of Contents

• Issues in the Market
• Key issues
• Abbreviations
• Market in Brief
• Several factors are influencing the IP market
• New sales are down across all protection products...
  • Figure 1: New sales of MPPI, CIC, and IP policies (by volume), 2002-06
• ...with sales of individual IP also following this trend...
  • Figure 2: New individual IP sales (by volume and value) and average annual premiums, 2002-07
• ...however, providers are starting to innovate
• Sales of IP through IFAs are increasing
  • Figure 3: Market share of the top five IP providers, based on new individual policy sales, 2006
• The top five IP providers dominate the market
  • Figure 4: New individual sales of IP, split by distribution channel, 2002-06
• Ownership peaks among those with families
• Beating complacency
• Internal Market Environment
• Key Points
• The income protection gap is still rising
  • Figure 5: Income protection gap (measured by annual benefit), 2002-06
• The new ICOB sourcebook
• New disclosure rules may impact margins, but will also boost confidence
• The formation of the Income Protection Task Force
• Negative perceptions of IP held by consumers and intermediaries
• Broader Market Environment
• Key Points
• Increasing numbers of single-occupancy households
  • Figure 6: Number of single-occupancy households in the UK, 1991-2012
• Population trends could impact sales of IP
  • Figure 7: Lifestage groups as a proportion of the UK population, 1996-2012
• Growth in number of working population provides boost for IP market
  • Figure 8: Total workforce and employment figures, 2002-12
• Consumer personal disposable income is increasing
  • Figure 9: PDI, consumer expenditure, and savings, 2002-12
• The uncertain future of state benefits?
• Number of beneficiaries continues to decline
  • Figure 10: Incapacity benefit/severe disablement allowance claimants and beficiaries, Feb 2000-May 2007
• Mortgage approvals have fallen significantly in 2007
  • Figure 11: Mortgage approvals, Jan 2002-Nov 2007
• Competitive Context
• Key Points
• Where does IP sit within the wider protection market?
• And what about consumer misconceptions?
• After life insurance, consumers seem to favour MPPI and CIC over IP
  • Figure 12: Number of people holding selected health/protection products, November 2007
• Gradual decline in sales of new MPPI policies since 2003
  • Figure 13: Gross new mortgage advances and new MPPI policies (by volume), H1 2002-H1 2007
• New sales of CIC have also declined over the last few years
  • Figure 14: New sales of individual CIC (by volume), 2002-06
• New sales of MPPI, CIC, and IP have all declined since 2002
  • Figure 15: New sales of MPPI, CIC, and IP policies (by volume), 2002-06
• Strengths and Weaknesses in the Market
• Market strengths
• A highly comprehensive product (offers good value for money)
• IP covers living costs, not just mortgage repayments
• The formation of the Income Protection Taskforce
• The industry is starting to innovate
• Market weaknesses
• Consumer and IFA confusion over IP
• IP is perceived to be a more expensive protection product
• A longer, more complicated underwriting process
• Negative stories in the press about policies ' not paying out'
• Market Size and Forecast
• Key Points
• New individual IP sales have been declining for a number of years...
  • Figure 16: New individual IP sales (by volume and value) and average annual premiums, 2002-07
• ...although the number of policies in-force continues to grow
  • Figure 17: Total number of individual IP policies in force, regular-premium income, and maximum benefits insured per annum, 2002-06
• After a big drop in 2003, income from group policies has recovered to 2002 levels
  • Figure 18: Group income protection schemes, 2002-06
• Average annual benefits have increased
  • Figure 19: Average annual benefits for IP policies (all channels), 2002-06
• Market forecast for new individual IP sales
  • Figure 20: Market size forecast of new individual IP sales (by volume and value) and average annual premiums, 2002-12Figure 21: Market size forecast of new individual IP sales (by volume and value) and average annual premiums, 2002-12
• Factors used in this forecast
• Market Share
• Key Points
• Background
• Top five providers dominate the market, with a 62% share
  • Figure 22: Market share of the top five IP providers, based on new individual policy sales, 2006
• Friends Provident remains in a strong position
  • Figure 23: New individual IP sales, 2006
• Companies and Products
• Key Points
• Key market developments
• Friends Provident
• Norwich Union (Aviva Group)
• Legal & General
• Brand Communication and Promotion
• Key Point
• Protection adspend is minimal compared to the wider industry...
• ...but it is still substantial
  • Figure 24: Adspend on selected protection products, by product type, 2003-07
• Outlet choice reflects target markets
  • Figure 25: Adspend on selected protection products, by outlet type, 2003-07
• ASU, not IP, heads the consumer push
  • Figure 26: Income protection adspend, by provider, 2005-07
• Tapping into the advisor market
• Channels to Market
• Key Points
• There are three distribution channels for IP
  • Figure 27: IP distribution channels, January 2006
• Income protection is predominantly an advised product
  • Figure 28: Proportion of Advised/non-advised sales of IP and CIC, Apr 2006 -- Mar 2007
• Sales of IP through IFAs have increased, at the expense of tied sales
  • Figure 29: New individual sales of IP, split by distribution channel, 2002-06
• The Consumer -- Product Ownership
• Key Points
• Income protection is well down the list...
  • Figure 30: Number of people holding selected health/protection products, November 2007
• ...and the balance could be shifting
  • Figure 31: Ownership of health/protection products, 2004-07
• Does wisdom come with age?
  • Figure 32: Ownership of selected protection products, by gender, age, and socio-economic group, November 2007
• Funding the family
  • Figure 33: Ownership of selected protection products, by gender, age, and socio-economic group, lifestage, age of children in household and marital status, November 2007
• The power of the mortgage interview
  • Figure 34: Ownership of selected protection products, by working status, household income, household tenure and TV region, November 2007
• Boosting online sales?
  • Figure 35: Ownership of selected protection products, by gender, age, and socio-economic group, lifestage, age of children in household and marital status, November 2007
• Male, under 55, and affluent
  • Figure 36: Profile of protection and income protection policy owners, November 2007
• The Consumer -- Barriers to Purchasing IP
• Key Points
• Sold -- not bought
  • Figure 37: Reasons for not having A CIC or IP policy, November 2007
• Complacency combines with a lack of trust
• Key limiting factors
• Do families just not know that they need IP?
  • Figure 38: Reasons for not having a CIC or IP policy, by gender, age, lifestage, age of children in household and marital status, November 2007
• Time to move away from the affluent?
  • Figure 39: Reasons for not having CIC or IP, by socio-economic group, gross annual household income, working status and household tenure, November 2007
• Selling through the tabloids
  • Figure 40: Reasons for not having a CIC or IP policy, by newspaper readership, technology users, TV region and supermarket usage, November 2007
• Cost and life changes pushing people out of the market
  • Figure 41: Reason for not having a CIC or IP policy among lapsed and non-owners, November 2007
• Caveat emptor -- "let the buyer beware"
  • Figure 42: "I don' t really understand how these products work", by product ownership, November 2007
• Higher standards among IP sales staff?
  • Figure 43: "Sales people put you under too much pressure to buy these kinds of products", by product ownership, November 2007
• Many do not trust insurers to pay out...
  • Figure 44: "I don' t trust insurers to pay out on these kinds of policies", by product ownership, November 2007
• ...but IP policyholders have faith in their cover
• Making a stressful time worse?
  • Figure 45: key demographic findings of people in agreement with the featured statements, November 2007
• Education the secret to improving the industry' s image?
  • Figure 46: Agreement with the statement "I don' t trust insurers to pay out on these kinds of policies", by understanding of how protection products work, November 2007
• Two-thirds of employees have never experienced long-term absence
  • Figure 47: Overview of long-term absence, November 2007
• Long-term sickness increases with age
  • Figure 48: Key demographic findings of responses to question concerning frequency of long-term absence from work, November 2007
• IP policyholders are least likely to have been absent for extended period
  • Figure 49: Frequency of long-term absence from work, by ownership of selected protection products, November 2007
• Healthy -- and complacent?
  • Figure 50: Frequency of long-term absence from work, by reasons for not having IP or CIC policy, November 2007
• Appendix
• Barriers to Purchasing IP
  • Figure 61: Agreement with statements concerning attitudes towards IP, by gender, age, lifestage, age of children in household and marital status, November 2007
  • Figure 62: Agreement with statements concerning attitudes towards IP, by socio-economic group, gross annual household income, working status and household tenure, November 2007
  • Figure 63: Agreement with statements concerning attitudes towards IP, by newspaper readership, technology users, TV region and supermarket usage, November 2007
  • Figure 64: Frequency of long-term absence, by gender, age, lifestage, number of children in household, and maritial status, November 2007
  • Figure 65: Frequency of long-term absence, by socio-economic group, gross annual household income, working status and household tenure, November 2007
  • Figure 66: Frequency of long-term absence, by newspaper readership, TV region, technology users, TV region and supermarket usage, November 2007
• Attitudes and Targeting Opportunities
  • Figure 67: Expectations of how long people could support themselves before falling into financial difficulty, if they or their partner fell ill, by gender, age, lifestage, age of children and marital status, November 2007
  • Figure 68: Expectations of how long people could support themselves before falling into financial difficulty, if they or their partner fell ill, by socio-economic group, gross annual household income, working status and household tenure, November 2007
  • Figure 69: Expectations of how long people could support themselves before falling into financial difficulty, if they or their partner fell ill, by newspaper readership, technology users, TV region and supermarket usage, November 2007
  • Figure 70: Expectations of how would people would support themselves if they could not work due to ill-health, by gender, age, lifestage, children in household and marital status, November 2007
  • Figure 71: Expectations of how would people would support themselves if they could not work due to ill-health, by socio-economic group, gross annual household income, working status and household tenure, November 2007
  • Figure 72: Expectations of how would people would support themselves if they could not work due to ill-health, by newspaper readership, technology users, TV region and supermarket usage, November 2007