Critical Illness Cover - UK - February 2008

Table of Contents

• Issues in the Market
• Report coverage
• Key issues in the market
• Product definitions
• Abbreviations
• Market in Brief
• Sales of CIC decline by more than 50%
  • Figure 1: Sales of new individual CIC and IP policies, 2002-07
• Housing market slowdown will lead to decline in CIC sales
• Legal & General takes top place
  • Figure 2: Market share based on new individual CIC sales, 2006
• CIC is well positioned in a crowded protection market
  • Figure 3: Ownership of selected protection and health insurance products, November 2007
• Attempts to tackle proportion of rejected claims
• Some signs of innovation
• Future challenges for the CIC market
• Adviser channels continue to dominate CIC sales
  • Figure 4: Distribution channel of different protection products, by volume of policies, 2006
• Key consumer findings
  • Figure 5: Reasons for not having CIC, November 2007
• Awareness and cost are main barriers
• Internal Market Environment
• Key points
• Protection market faces a £2.3 trillion protection gap
  • Figure 6: The life assurance protection gap, 2002-06
• 80% of CIC sales are linked to life insurance policies
  • Figure 7: Value and volume of new individual regular-premium life insurance policies written, 2001-07
• Short-term impact of PTA
• CIC illness premiums fall...
• ...but not in line with the cost of life cover
• Cancer dominates CIC claims
  • Figure 8: Main causes of claims for critical illness, October 2006
• Cancer cases have increased by 25% since 1975
  • Figure 9: Age-standardised incidence rates (except non-melanoma skin cancer), by gender, 1975-2004
• Cancer mortality rates drop by 16%
  • Figure 10: Age-standardised incidence of all cancers and mortality rates (except non-melanoma skin cancer), 1975-2005
• Other major critical illnesses
• Impact of lifestyle factors on critical illness cover
• The smoking ban
• The growing problem of obesity
• Concern over drinking habits
• Lifestyle underwriting
• Genetic testing -- set for a review in 2008
• Broader Market Environment
• Key points
• Property transactions have been on an upward trend...
  • Figure 11: The number of property transactions in England and Wales, 1995-2007
• ...however, housing market slowdown will hit CIC sales
  • Figure 12: New mortgage business, by volume and value, 2000-07
• CIC sales suffer as number of first-time buyers falls
• Cautious economic outlook presents tough conditions for CIC market
  • Figure 13: Trends in PDI, consumer expenditure and savings, 2002-12
• Life-expectancy continues to rise
  • Figure 14: Life-expectancy projections for people aged 65, by gender, 1987-2052
• Growth in one-person households is opportunity for CIC industry
  • Figure 15: Total number of households and one-person households, 1991-2012
• Industry, Regulatory and Legislative Developments
• Key points
• Rejected claims undermine consumer confidence
• Non-disclosure remains industry priority
• ABI publishes new definitions and guidelines
• Other developments
• Changes to ICOB
• Law Commission review
• Retail Distribution Review
• Competitive Context
• Key points
• A plethora of protection products
  • Figure 16: Ownership of selected protection and health insurance products, November 2007
• Range of products leads to customer confusion
• Critical Illness Cover vs Income Protection
  • Figure 17: Sales of new individual CIC and IP policies, 2002-06
• Why is CIC more popular?
• MPPI sales reflect trends in mortgage market
  • Figure 18: The number of gross mortgage and MPPI sales, 2000-06
• One in ten opt for unemployment cover only
  • Figure 19: Split of MPPI sales, by ASU cover only, unemployment cover only and full ASU, 2000-06
• Disease-specific cover
• Strengths and Weaknesses in the Market
  • Figure 20: Key strengths and weaknesses of the critical illness market, 2008
• Strengths in the market
• Weaknesses in the market
• Market Size and Forecast
• Key points
• Market size data
• Sales of CIC continue to decline
  • Figure 21: Sales of new individual CIC and IP policies, 2002-06
• Mortgage-related sales account for 61% of new business in 2006
  • Figure 22: Sales of CIC, by mortgage-related and non-mortgage-related sales, 2000-06
• Industry expects greater focus on non-mortgage-related sales
• Average sum assured increases as house prices continue to rise
  • Figure 23: Average sum assured for new CIC polices, and average house prices, 1992-2006
• Volume of new business falls by 35% since 2000
  • Figure 24: Volume of sales of new critical illness policies, by type of policy, 2000-07
• Value of new business falls by 32% since 2000
  • Figure 25: Value of new critical illness policies, by type, 2000-07
• Term assurance accounts for 96% of all ACCI sales
  • Figure 26: New individual accelerated critical illness sales, by life protection product, 2002-06
• Sales of group CIC cover are in decline
  • Figure 27: Total new premiums, regular-premium group critical illness cover, 2002-07
• Group CIC business in force -- membership down but premiums up
  • Figure 28: Summary of group critical illness cover, policies in force, 2002-06
• CIC market forecast to decline by 12% in 2008
  • Figure 29: Number of new sales of critical illness cover, 1992-2012
  • Figure 30: Forecast of the volume of new individual critical illness cover sales, 2002-12
• Some potential to outgrow forecast
• Factors used in the forecast
• Market Share
• Key points
• Legal & General lead market share for new CIC sales
  • Figure 31: Market share based on new individual CIC sales, 2006
• Top providers are losing market share
  • Figure 32: Top product providers, by new CIC sales, 2004-06
• Legal & General top life company rankings
  • Figure 33: Life company rankings, by new regular-premium business, 2004-06
• Companies and Products
• Product evolution
• Key market developments
• Selected claims data
  • Figure 34: Published claims data from selected providers of CIC, 2006
• Key players in group critical illness market
• Company profiles of leading insurers in individual CIC market
• Legal & General
• Resolution
• Norwich Union Life
• Friends Provident
• Brand Communication and Promotion
• Key points
• Adspend of life insurance accounts for 3% of all financial promotion
• Critical illness adspend totals £1.46 million in 2006/07
  • Figure 35: Total advertising expenditure on critical illness cover, 2002/03-2006/07
• Adspend on CIC exceeds income protection and MPPI
  • Figure 36: Advertising on selected protection products, 2002/03-2006/07
• Prudential was the highest advertiser in 2006/07
  • Figure 37: Advertising expenditure on critical illness cover, by advertiser, 2002/03-2006/07
• Direct mail is favoured advertising channel
  • Figure 38: Advertising expenditure on critical illness cover, by media type, 2006/07
• Channels to Market
• Key points
• Classification of distribution channels
• Tied sales account for largest proportion of CIC new business
  • Figure 39: Distribution channel of different protection products, by volume of policies, 2006
• Direct sales increased by more than 30% in 2006
  • Figure 40: Distribution of new individual critical illness sales, by volume of policies, 2004-06
• ABI distribution classifications
• IFA sales account for 51% of the value of new ACCI policies
  • Figure 41: Distribution channel of CIC sold as an accelerated policy, by value of business, 2004-06
• IFA sales account for 62% of the value of standalone CIC policies
  • Figure 42: Distribution channel of CIC sold as a standalone policy, by value of business, 2004-06
• 87% of pure protection contracts sold with advice
• Purchasing distribution to assure future
• Insurer/broker acquisitions in 2006/07:
• The Consumer - Product Ownership
• Key points
• 6.7 million adults have critical illness cover
  • Figure 43: Number of people holding selected health/protection products, November 2007
• Ownership of protection products appears to be increasing
  • Figure 44: Ownership of health/protection products, 2004-07
• Product ownership highest amongst those aged 25-44
  • Figure 45: Ownership of selected protection products, by gender, age, lifestage, age of children in household and marital status, November 2007
• Growth for singletons?
• A third of families with two earners have CIC
  • Figure 46: Ownership of selected protection products, by detailed demographics of the family lifestage, November 2007
• A fifth of ABC1s have critical illness cover
  • Figure 47: Ownership of selected protection products, by socio-economic group, gross annual household income, working status and household tenure, November 2007
• Considerable regional variation in ownership of CIC
  • Figure 48: Ownership of selected protection products, by neswspaper redaership, technology users, TV region and supermarket usage, November 2007
• Protection packages -- the way forward?
  • Figure 49: Repertoire analysis of protection products owned, November 2007
• Four in ten CIC policyholders have at least three protection products
  • Figure 50: Cross-holding of protection products, November 2007
• The Consumer - Barriers to Purchase
• Key points
• Growth in CIC sector restricted by awareness and cost
  • Figure 51: Reasons for not having a CIC policy, November 2007
• Barriers categorised into key groups
• 31% of non-policyholders lack awareness of CIC
  • Figure 52: Reasons for not having CIC, November 2007
• Almost a fifth of those without children see no need for CIC
  • Figure 53: Reasons for not having a CIC policy, by gender, age, lifestage, age of children in household and marital status, November 2007
• ABC1s less likely to see a need for CIC
  • Figure 54: Reasons for not having a CIC policy, by socio-economic group, gross annual household income, working status and household tenure, November 2007
• Internet users are more likely to have alternatives to CIC
  • Figure 55: Reasons for not having a CIC policy, by newspaper readership, technology users, TV region and supermarket usage, November 2007
• Cost causes people to turn to MPPI or to cancel their cover
  • Figure 56: Reason for not having a CIC policy, by ownership of other health/protection products, November 2007
• 55% of people believe CIC is sold with too much pressure
  • Figure 57: Agreement with statements concerning attitudes towards CIC, November 2007
• Over-45s are the most concerned about the non-payment of claims
  • Figure 58: Key demographic findings of people in agreement with the featured statements, November 2007
• Too much pressure could erode trust
  • Figure 59: Agreement with the statement ' Salespeople put you under too much pressure to buy these kind of products' , by reason for not having a CIC policy, November 2007
• Is cost a smokescreen for a lack of understanding?
  • Figure 60: Agreement with the statement ' I don' t really understand how these products work' , by reason for not having a CIC policy, November 2007
• Some 80% who lack trust highlight non-payment of claims as an issue
  • Figure 61: Agreement with the statement ' I don' t trust insurers to pay out on these kinds of policies' , by reason for not having a CIC policy, November 2007
• Appendix -- Barriers to Purchasing Critical Illness Cover
  • Figure 74: Agreement with statements concerning attitudes towards CIC, by gender, age, lifestage, age of children in household and marital status, November 2007
  • Figure 75: Agreement with statements concerning attitudes towards CIC, by socio-economic group, gross annual household income, working status and household tenure, November 2007
  • Figure 76: Agreement with statements concerning attitudes towards CIC, by newspaper readership, technology users, TV region and supermarket usage, November 2007
• Appendix -- Attitudes and Targeting Opportunities
  • Figure 77: 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 78: 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 79: 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 80: Expectations of how 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 81: Expectations of how 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 82: Expectations of how 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
  • Figure 83: Overview of responses to the question ' There are many things which can happen to you in life -- which of the following do you think are the MOST likely to happen to you at some stage in your future life?' , November 2007