The Future of UK Protection 2009

Content

• 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 Have A Low Perception of Need for Income Protection
• Providers Should Simplify The Critical Illness Insurance Product to Revive Sales
• There Has 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
• Income Protection 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
• Income Protection Will Continue to Have Small Market Share
• Critical Illness Insurance 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 with Rising Personal Debt
• Consumers Believe They Do Not Need Protection
• Consumers Also Overestimate The Cost of Cover
• Consumers' Mistrust for 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 IT More Tangible for Customers
• Providers Need to Focus on Customers Rather than Price Too Boost Term Sales
• A Shift in Emphasis from Price to Quality Is Needed to Make Term Meaningful to Consumers
• Example of Successful Strategy: Pruhealth Rewards Customers Who Make An Effort to Lead Healthier Lifestyles
• in times of Falling Mortgage Markets, Term Sales Must Be Bolstered through Customer Education
• Simplicity Is Key to Regain Consumers' and Advisors' Trust in Critical Illness Insurance
• Many Consumers and Advisors Have Lost Trust in Cii
• Abi Members Must Cover The 23 Abi Critical Illness Conditions in Their Policies
• Advisors Have A Vital Role to Play to Curb Any Confusion at The Outset
• Regulatory Bodies Have Worked to Make Definitions of Critical Illnesses Clearer but This May Not Improve Public Attitude towards The Product
• 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
• A Severity-based Model May Be A Better Fit for Advances in Medical Science
• However, Concerns around Product Complexity Is Making Providers Wary about Introducing Severity-based Cover to The Market
• Pruprotect Introduced The Concept of Severity-based Cii Cover in 2006
• 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
• However, Different Levels of Tele-underwriting Causes 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 Put Further Investment on The Value of Tele-underwriting and The Increased Disclosure IT Delivers
• Life Companies Have Allocated More Resources to Advisors' Extranet Capabilities and Target More Protection Business
• Providers Increased Training Available to Advisors to Help Maintain Their Market Share
• Friends Provident Have Stated to Potentially Offer Protection Policies on Wrap Platforms
• However, Providers Need to Ensure That Propositions Truly Complement The Many Different Ifa Models
• The Protection Market Is Highly Concentrated
• Legal & General Writes The Highest in New Business Premiums in Term Assurance and Critical Illness Insurance
• Legal & General's Strength Lies in Distribution
• Legal & General Has A Strong Relationship with Ifas
• Legal & General Also Has Strong Historic Relationships with Banks
• Hsbc and Friends Provident Dominate The Income Protection Market
• Hsbc's Income Protection Policy Allows Customers to Decide When Benefits Start
• Friends Provident Regularly Moves to Enable Faster Processing of Applications
• Friends Provident Extends Its Protection Distribution by Partnering with Tesco Personal Finance
• 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 and 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
• Technology Is Affecting The Way Protection Business Is Being Conducted
• Increased Competition Could Lead to Pressure on Margins
• However, Concerns and Criticisms Are Being Leveled at Non-advised Sales
• Problems Also Arising between Direct Sales and Advisor Channels
• Protection Products Will Increasingly Be Distributed through Non-intermediated Channels over The next 5 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
• Convertible Term Assurance
• Decreasing Term Assurance
• Increasing Term Assurance
• Level Term Assurance
• Mortgage-related Term Assurance
• Pension Term Assurance
• Renewable Term Assurance
• Abi Definitions of Distribution Channels
• Independent Financial Advisors (ifas)
• Direct Sales Forces
• Tied Agents
• Multi-tied Agents
• Bancassurance
• Direct Marketing
• Telesales
• Other
• Further Reading
• Ask The Analyst
• Datamonitor Consulting
• Disclaimer
• List of Tables
  • Table 1: Regular premium life market, new business premiums 2004-2008, ??m APE
  • Table 2: Total regular premium life market adjusted for rider products, new business premiums, ??m APE
  • Table 3: Forecasts regular premium life market, new business premiums 2009-2013, ??m APE
  • Table 4: Forecasts total regular premium life market adjusted for rider products, new business premiums 2009-2013, ??m APE
  • Table 5: Term assurance new business premiums 2004-2008, ??m APE
  • Table 6: The top 20 term assurance competitors, new business premiums 2008, ??m APE
  • Table 7: The top 20 critical illness insurance competitors, new business premiums 2008, ??m APE
  • Table 8: The top 20 income protection competitors, new business premiums 2008, ??m APE
  • Table 9: Regular premium life market, new business premiums segmented by distribution channel, ??m APE
  • Table 10: Forecasts regular premium life market, new business premiums 2009-2013, ??m APE
• List of Figures
  • Figure 1: The total regular premium life market has declined by 4% over the last five years
  • Figure 2: Premiums for CII written as a rider to term assurance see an upturn in 2008
  • Figure 3: The regular premium life market will grow by a slender 2% over the next five years
  • Figure 4: Consumers perceive protection insurance as either unnecessary or unaffordable
  • Figure 5: New business premiums for term assurance has declined by 4% over the last 5 years
  • Figure 6: PruHealth makes health insurance more tangible by rewarding customers who lead healthier lives
  • Figure 7: The term assurance market is dominated by Legal & General
  • Figure 8: Legal & General commands top spot in the critical illness market
  • Figure 9: HSBC and Friends Provident were the top income protection insurers in 2008
  • Figure 10: IFAs are the main distribution channel for protection products
  • Figure 11: Online price comparison sites and banks are the most trusted financial institutions
  • Figure 12: Non-intermediated channels will gain market share from IFAs over the next 5 years