This publication has been discontinued on July 19, 2011.
Abstract
Introduction
This report provides a comprehensive analysis of the UK Critical Illness &
Income Protection insurance markets providing market sizing, distribution and
competitor information. The report also explores how providers can revive
sales in these markets and provides the reader with forecasts of market size
up to 2012.
Scope
*Recommendations on how providers can revive growth in these sectors
*Information on market size and forecasts of market size up to 2012
*Competitor premium income and market share data
Highlights
Datamonitor would advocate providers introducing "lite" versions of the
traditional CII product along the lines of Virgin' s Cancer Cover. For instance
providers could introduce separate policies aimed at the three most common
types of CII claim: cancer, heart attack and strokes.
Premiums for CII written as a rider to term insurance have declined
significantly since 2003. In 2003 premiums totaled £378m however this figure
dropped off markedly in 2004 and 2005 and by 2007 premiums totaled £218m,
representing a 42.3% fall. Despite an increase in 2006 new business premiums
declined by a further 9.9% in 2007
Reasons to Purchase
*Feed into your business planning activity
*Understand market size and growth
*Benchmark your position against the position of other players in the
market
Table of Contents
Overview 1
Catalyst 1
Summary 1
Executive Summary 2
There are
various strategies that providers can adopt to revive sales of CII and IP
2
"CII-lite" policies would be a good way to reduce the cost of policies
and capture consumers' interest 2
Specialist protection providers are
growing their market share 2
Critical illness insurance is designed to pay
out a lump sum on diagnosis of a critical illness while income protection
insurance is designed to replace a policyholder' s monthly income 2
Critical illness insurance pays out a lump sum on diagnosis of a critical
illness 2
Income protection insurance is designed to provide a monthly
income should the policyholder not be able to work through injury or ill
health 2
New business premiums for IP held flat in 2007 while CII written
as a rider product declined significantly 3
Income protection new business
premiums have declined significantly between 2003 and 2007 while stand alone
critical illness insurance premiums have remained flat 3
Premiums for CII
written as a rider to term insurance have declined considerably since 2003
3
Providers are making moves to innovate their product sets 3
Fortis
causes a stir in the market with Real Life Cover 3
LV= launches new
Mortgage & Lifestyle Protection product 3
Table of Contents 4
Table of
figures 5
Table of tables 6
Special feature: How to bring about a
turnaround in the fortunes of IP and CII 7
Providers should consider
introducing low cost "CII-lite" policies that are more aligned with the prices
consumers are willing to pay 7
A key barrier to sales is the cost of CII
7
"CII-lite" policies would be a good way to reduce the cost of policies
and capture consumers' interest 7
Providers should focus on pushing CII
and IP business through direct players and aggregators 7
Specialist
protection providers are growing their market share 7
Sales of life
assurance via aggregators are currently low but nevertheless may increase in
the future 8
More insurers should seek to speed up the underwriting of IP
8
Financial and medical underwriting can take a significant amount of time
8
Insurers should consider increasing financial underwriting limits 8
More insurers should implement tele-underwriting 9
Providers should focus
on increasing public trust in IP 9
Many consumers and advisers have lost
trust in IP 9
Zurich recorded a high percentage of paid CII claims 9
Many providers increased the proportion of CII claims paid in 2007 11
Insurers should organize an industry wide advertising campaign to promote
protection products 11
The protection market is set to contract in 2009
before growing thereafter 11
A contracting mortgage market will mean new
business premiums fall in 2009 11
Premiums will rise as the economy and
mortgage market recover 12
The credit crunch may have positive and
negative effects on CII and IP sales 12
Market focus 15
Critical
illness insurance is designed to pay out a lump sum on diagnosis of a critical
illness and prices are heavily influenced by consumers' age, gender, health
and family medical history 15
Critical illness insurance pays out a lump
sum on diagnosis of a critical illness 15
ABI members must cover the 23
ABI critical illness conditions in their policies 15
Underwriters are
interested in applicant' s age, gender, health and medical history 16
Income protection insurance is designed to replace a policyholder' s monthly
income should they be unable to work due to injury or ill-health 16
Income
protection insurance is designed to provide a monthly income should the
policyholder not be able to work through injury or ill health 16
The
definition of incapacity is important when choosing an income protection
policy 17
Parts of the state benefit system are due to change in October
2008 which may effect the IP market favourably 17
The state provides a
range of benefits to help those who are sick or disabled 17
The government
is replacing incapacity benefit with Employment Support Allowance in October
2008 which may reduce the number of new IP claims 18
New business premiums
for IP and standalone CII held flat in 2007 while CII written as a rider
product declined significantly 18
Total regular premium protection new
business declined by a compound annual rate of 4.1% between 2003 and 2007
18
Income protection new business premiums have declined significantly
between 2003 and 2007 while stand alone critical illness insurance premiums
have remained flat 20
Premiums for CII written as a rider to term
insurance have declined considerably since 2003 22
The number of new
contracts for IP and stand alone CII increased significantly in 2007 23
Distribution dynamics 26
The IFA/Whole of market advisor channel dominates
the distribution of IP and stand alone CII insurance however the
non-intermediated channel is growing quickly in the IP market 26
The
non-intermediated channel grew its share of income protection new business
distribution significantly in 2007 26
Cardif Pinnacle acquires Direct Life
& Pensions Service 26
LifeSearch has been active in the market 26
The
IFA/whole of market advisor channel continued to dominate the distribution of
stand alone CII in 2007 however it did lose market share 28
Competitive
dynamics 31
Legal & General leads the market in accelerated CII products
31
Legal & General was the clear leader in accelerated CII in 2007 31
AIG was the largest provider of standalone CII 31
Friends Provident was
the top IP insurer in 2007 32
Providers are making moves to innovate their
product sets 33
Friends Provident has made a number of changes to its
proposition to enable faster processing of applications 33
Friends
Provident introduced tele-underwriting for IP applications 33
Friends
Provident increased its financial underwriting limits for life and CII 34
Fortis has shaken up the market with an innovative lower cost product
combining a number of products into one policy 34
Fortis causes a stir in
the market with Real Life Cover 34
Royal Liver is going to roll out a
similar product to Real Life Cover in conjunction with LifeSearch 35
Legal
& General has also taken steps to speed up the application process and has
signed several new partnerships 35
Legal & General drops the need for
disclosure of changes between acceptance and start of life policies 35
Legal & General takes steps to make financial underwriting easier 35
Legal
& General signs two new distribution agreements 35
LV= has launched a new
product called Mortgage & Lifestyle Protection which is an interesting
combination of MPPI and IP 35
LV= reduces flexible rates 35
LV=
launches new Mortgage & Lifestyle Protection product 36
Aviva has added
several benefits to its CII policies and launched a new IP proposition 36
Aviva adds several benefits to its CII policies retrospectively 36
Aviva
Healthcare launches Income Protection Solutions 36
Appendix 37
Definitions 37
Products 37
Income Protection 37
Critical Illness
37
ABI definitions of distribution channels 37
Independent Financial
Advisors (IFAs) 37
Direct sales forces 37
Tied agents 37
Multi-tied agents 37
Bancassurance 37
Direct marketing 38
Telesales 38
Other 38
Further reading 38
Ask the analyst 38
Datamonitor consulting 38
Disclaimer 38
List of Tables
Table 1:
Claims paid and claims declined data, selected providers, 2007 10
Table 2:
Forecast total regular premium life market, new business premiums, £m 14
Table 3: Total regular premium life market, new business premiums, £m 20
Table 4: Total regular premium life market adjusted for rider products, new
business premiums, £m 23
Table 5: Total regular premium life market,
number of new contracts 25
Table 6: Income protection distribution,
2003-07, (£m APE) 28
Table 7: Stand alone critical illness insurance
distribution, 2003-07 (£m APE) 30
Table 8: Accelerated CII new business
premiums, 2006-07 (£000) 31
Table 9: Standalone CII new business premiums,
2006-07 (£000) 32
Table 10: Income protection new business premiums by
competitor, 2006-07 (£000) 33
List of Figures
Figure 1: Zurich paid
the highest proportion of CII claims of the four providers 10
Figure 2:
Regular premium life new business premiums are forecast to contract in 2009
before growing between 2010 and 2012 13
Figure 3: Regular premium
protection new business has fallen since 2003 however premiums picked up in
2007 19
Figure 4: New business premiums for income protection insurance
have declined between 2003 and 2007 while stand alone CII premiums have held
fairly flat 21
Figure 5: New business premiums for CII written as a rider
to term insurance outweigh stand alone CII premiums 22
Figure 6: The
number of new contracts for IP insurance and stand alone CII increased
significantly in 2007 24
Figure 7: The non-intermediated channel grew its
share of income protection new business distribution significantly in 2007
27
Figure 8: The single tie excluding bancassurance channel increased its
market share of distribution of stand alone CII in 2007 29
