UK Term Assurance 2007

Content

• Overview
• Catalyst
• Summary
• Executive Summary
• Market Focus
• Sector Issues
• Competitor Issues
• Distribution Dynamics
• Market Focus
  • The total UK protection market has shrunk over the last five years
  • The UK term assurance market is spiralling downwards
  • No recovery of the term assurance market is in sight
  • New business premiums for the total market have dropped by a further 6%
  • Changes in critical illness insurance have caused with rider term assurance to lose its appeal
  • The term assurance share of the protection market has declined between 2002 and 2006
  • Persistency of policies is an issue in the term assurance industry
  • Datamonitor forecasts growth in both the mortgage and non mortgage-related sides of the term market
  • The price war has had no impact on the protection gap
  • The UK protection gap may widen further
  • While personal debt goes up, consumers do not seek adequate financial protection
  • Higher premiums for older applicants may push down cover levels
  • Young Brits seem to be more concerned by price rather than product suitability
  • Negative press intensifies consumers' mixed feelings about life insurance
  • Competition is fierce
  • Price continues to be the critical feature for term assurance
  • The scope for price reductions may not yet be fully exhausted
  • The mortgage-related sector is less focused on price
  • Insurers have been sorely disappointed on Pension Term Assurance (PTA)
  • The Government's decision to remove tax relief on PTA has dealt a blow to the industry
  • Government's decision has been met with condemnation
  • There may still be loopholes in pensions term assurance that can be exploited
  • A variety of key products exist in the term assurance market
  • Level term assurance
  • Decreasing term assurance
  • Mortgage-related term assurance
  • Increasing term assurance
  • Renewable term assurance
  • Convertible term assurance
  • Pension term assurance
• Sector Issues
  • Term assurance causes mixed feelings
  • Negative press adds distrust to dislike
  • Market decisions have been driven by the price war
  • Price continues to be a critical issue for insurers
  • Price has turned into the defining feature for term assurance
  • The price war is not over yet
  • However, price cuts have undermined distribution
  • The prerequisite for success is a sound distribution strategy
  • Insurers seem to have underrated the importance of distribution
  • The underwriting process is too complex for both consumers and distributors
  • Electronic underwriting could become the norm for the majority of applications
  • The discussion regarding the efficiency of tele-underwriting is on-going
  • Legal and General has been awarded for its Interactive Underwriting
  • Key strategies exist for providers to boost term assurance sales
  • Ongoing education should improve the consumer perception of term assurance
  • Providers need to rethink distribution strategies
  • Distribution partners need incentives
  • Online sales should offer as much advice as possible
  • Providers will need to make term assurance easier to sell
  • Providers need to differentiate the product
• Competitor Issues
  • The term assurance market is highly concentrated
  • In 2005, the top 3 competitors controlled 54% of the market for both level and decreasing term assurance
  • Legal & General alone has a market share of close to 20% in level term assurance
  • Legal & General is also the clear market leader in decreasing term assurance
  • Company profiles reveal strategic differences
  • Legal & General -a key strength is distribution
  • The products give only limited flexibility
  • Life Insurance and Mortgage Life Insurance
  • Family Life Insurance Plan
  • Legal & General distributes through a most extensive channel network
  • A strong relationship with IFAs, coupled with a broad distribution network, is one of L&G's strengths
  • Friends Provident - differentiation through service levels
  • The products show a good degree of flexibility
  • Friends Provident wants to be different in service
  • Friends Provident has recognized the need to expand its distribution network
  • HBOS - using its strength in the mortgage market
  • Life insurance is offered in the context of a comprehensive protection package
  • HBOS concentrates on the less competitive mortgage-related segment
  • HBOS' strength in the mortgage market gives it a head start in the protection business
  • Aviva - competing on price in the front line
  • Norwich Union policies are simple and standardized
  • Norwich Union aims at process optimization to facilitate the low-cost offering
  • AEGON Scottish Equitable - differing through product quality
  • The product package can cover a comprehensive protection need
  • Flexibility is the key feature of AEGON Scottish Equitable's offering
  • White-labeled products allow for new market entries
  • Greenbee is expanding into the life insurance market
  • Innovation is centering on underwriting
  • Electronic underwriting appears to be the most efficient way forward
  • Norwich Union is at the forefront of tele-underwriting
  • Legal & General has developed interactive underwriting
• Distribution Dynamics
  • Term assurance distribution remains focused on the IFA channel
  • Single-tie sales of savings related term assurance have been hit by a lack of customer confidence in the product
  • Bancassurers have increased their share of the mortgage related term market
  • Datamonitor forecasts solid growth in single tied distribution of savings related bancassurance
  • Banks are set to continue increasing their presence in the mortgage related term assurance market
  • Providers are looking to broaden their distribution strategy
  • Insurers are looking more into direct sales
  • The pressure has increased to expand online sales capabilities
  • Problems are arising between direct sales and advisor channels
  • Non-advised sales have been harshly criticized
• Appendix
  • Definitions
  • Term assurance
  • Convertible term assurance
  • Decreasing term assurance
  • Increasing term assurance
  • Level term assurance
  • Mortgage-related term assurance
  • Pension term assurance
  • Renewable term assurance
  • Further reading
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
• List Of Tables
  • Table 1: Total UK protection market 2002-2006, new business premiums m
  • Table 2: The UK term assurance market 2002-2006, segmented by mortgage related and non mortgage-related, new business premiums m APE
  • Table 3: % share of UK protection market attributed to each of the 3 key product, 2002-2006
  • Table 4: Comparison of business in force value to new business premiums written 2001-2005, m
  • Table 5: Forecast term assurance segmented by mortgage-related and non mortgage-related 2007-2011, new business premiums m
  • Table 6: Savings related term assurance distribution 2002-2006, new business premiums m
  • Table 7: Mortgage related term assurance distribution 2002-2006, new business premiums m
  • Table 8: Forecast savings related term assurance distribution 2007-2011, new business premiums m
  • Table 9: Forecast mortgage related term assurance new business, 2007-2011 new business premiums m
• List Of Figures
  • Figure 1: Premiums in the stand-alone term assurance market have declined
  • Figure 2: Since 2003, new business premiums have dropped by 10% compounded annually, 2002-6
  • Figure 3: In 2006, with rider policies accounted for 40% of the total new business, compared to 46% in 2002
  • Figure 4: % share of UK protection market attributed to each of the 3 key product
  • Figure 5: Comparison of business in force value to new business premiums written, m
  • Figure 6: Mortgage related products will continue to dominate the market
  • Figure 7: The Top 10 players controlled 88% of the new business in the level term assurance segment in 2005
  • Figure 8: Legal & General is the dominating force for decreasing cover products, 2005
  • Figure 9: The largest decline in savings related term assurance distribution has been through non-bancassurance single tie advisors
  • Figure 10: Banks have increased their share of the mortgage related term assurance market
  • Figure 11: Datamonitor forecasts solid growth in single tied distribution of savings related bancassurance
  • Figure 12: The distribution of mortgage related term assurance will remain largely unchanged