The Future of UK Protection 2009

The Future of UK Protection 2009 published by Datamonitor in May, 2009. This report consists of 55 pages and the price starts from US $ 4495.

Introduction

Abstract

Introduction

The current economic turmoil, characterized by plummeting share prices and a troubled housing market, is in some areas having a positive impact on the protection market. In spite of current challenges, providers can capitalize on consumers' realization of the value of term, income protection and critical illness insurance through simplification of products and expansion of distribution channels.

Scope of this research

• Examines the current shape of the protection industry and explore factors that are currently limiting new business.
• Assesses strategies to combat barriers to consumer engagement with term, critical illness insurance and income protection.
• Identifies key competitors and examines their differing strategies in the UK protection market.

Research and analysis highlights

The need to focus on customer education from all industry parties has never been more urgent. In particular, advisors are well placed to sell protection and educate customers to its importance.

Key reasons to purchase this research

• Gain valuable insight into how to react to the latest innovations and developments in the protection market.
• Understand the protection market, the distribution trends and the key drivers of new business for term, CII and IP.
• Access Datamonitor' s forecasts for the market and valuable knowledge of how the sector is set to develop.

Table of Contents

OVERVIEW

• Catalyst
• Summary

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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