UK Protection 2010

Introduction

The protection market will see improvements at a time when the economy is at a pivotal point of recovery. Consumers are more financially aware of risks in the aftermath of the financial which will have a positive effect on the uptake of protection products.

Scope

*Sizes the UK protection market and identifies lucrative consumer segment opportunities for providers.

*Highlights barriers to entry into the protection market for consumers and assess strategies to combat these barriers.

*Identifies the top competitors and distribution channels of the UK protection market.

Highlights

Consumers have become more financially aware given the financial crisis however they lack understanding of the product and where to seek advice. Advisors are perfectly positioned to educate consumers in hedging protection risks.

Reasons to Purchase

*Understand of the size, shape and key drivers of the protection market.

*Gain invaluable insight in to the latest innovations and developments in the market

*Access Datamonitor’s forecasts for the market and distribution channels and gain valuable understanding of market development.


Report Highlights

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Overview 1
Catalyst 1
Summary 1
Executive Summary 2
The protection market continued to contract in 2009 2
Providers need to innovate products and improve clarity in order to attract consumers 2
Regulatory issues will impact on the protection market 2
IFAs are the dominant channel, but non-intermediated channels are forecast to increase 2
Table of Contents 3
Table of figures 4
Table of tables 5
Market context 6
The full suite of protection consists of five main types of products 6
Whole of life policies have guaranteed payouts 6
Term assurance is the most basic form of life assurance 7
Critical illness products provide a helping hand in difficult circumstances 8
Income protection products provide an income stream in times of need 9
Long-term care Insurance 10
New business in the protection market has seen a decline of 0.5% 10
Whole of life has maintained 2008 levels despite a contacting protection market 10
Savings related term assurance continues its upward swing of growth in 2009 11
Sales of IP have fallen by 8.5% compared to the previous year's new business 12
Standalone CII is losing popularity among consumers 13
CII as a rider to term assurance accounts for a majority of the market 13
Long-term care accounted for only 1.3% of the protection market new business premiums in 2009 15
The total protection market is forecast to grow at a CAGR of 1.2% between 2010 and 2014 15
Mortgage related term assurance 16
Savings related term assurance will return to pre-recessionary levels 17
Whole of life will peak in 2011 before declining thereafter 17
Income protection will experience low growth of 1.5% over 2010-14 18
Critical illness 18
CII as a rider to term assurance will see growth of 5% from 2010 to 2014 19
Market issues 20
Providers need to encourage consumers to engage in the protection market 20
The UK protection gap grew alarmingly to £2.4 trillion in 2009 20
Attempts to engage the consumer have failed as consumers continue to undervalue protection products 20
Providers should encourage consumers as they become more proactive in their financial situation 20
Consumers believe that they do not need protection products 21
Consumers' motivations for engaging with protection tend to hinge on key life events 22
Providers need to explore alternative channels to engage consumers 22
Different age groups have different benefits for providers 23
Providers need to explore alternative ways to attract consumers 23
Consumers are devaluing the product 24
Aggregators draw consumers' attention to price rather than the suitability of the product to their needs 24
Providers need to focus on product innovation to attract consumers 25
Aviva offers free life cover to new parents 25
Benefits to the consumer 26
Why offer one year's free life assurance? 26
Providers who prepare for regulatory changes will stand in good stead for the near future 27
The RDR is on track for 2012 despite the FSA's dissolution 27
The dissolving of the FSA will impact on the regulatory landscape of the protection market 27
Providers should not undervalue LTCI as a protection product 27
Insurers must seek stronger reoccurring inflows 28
Competitor Dynamics 29
L&G wrote the highest proportion of new term assurance business in 2009 29
Royal London Mutual moves is top for new business premiums in the critical illness market 31
CIS writes the highest level of new business for WOL to knock Forresters into second place 33
HSBC commands the IP market having written £8.6m APE in 2009 34
Distribution Dynamics 37
IFAs are the major distribution channel 37
What are the distribution channels? 37
IFAs play a key role in the education of consumers 37
Aggregator sites challenge IFAs 39
Aggregator sites are changing the distribution landscape 39
IFAs need to keep up with the advances in technology and its impact on the protection business 39
An increase in price competition through aggregator sites is squeezing profit margins 40
Non-advised sales are detrimental to the consumer experience 41
Consumers have reasons to mistrust the protection market 41
Consumers find protection products confusing 41
The future of distribution channels 41
Non-intermediated channels are set to increase 41
Bancassurance has failed to challenge dominant IFAs 43
APPENDIX 44
Definitions 44
Critical illness 44
Income protection 44
Term assurance 44
Convertible term assurance 44
Decreasing term assurance 44
Increasing term assurance 44
Level term assurance 44
Mortgage related term assurance 45
Pension term assurance 45
Renewable term assurance 45
ABI definitions of distribution channels 45
Independent financial advisors (IFAs) 45
Direct sales forces 45
Tied agents 46
Multi-tied agents 46
Bancassurance 46
Direct marketing 46
Telesales 46
Other 46
Further reading 46
Ask the analyst 46
Datamonitor consulting 46
Disclaimer 47
List of Tables
Table 1: Protection products, new business premiums (£m APE), 2005-09 13
Table 2: Total regular premiums adjusted for rider products, new business premiums (£m APE), 2005-09 15
Table 3: Forecast protection market, new business premiums (£m APE), 2010-14 17
Table 4: Forecast protection market adjusted for rider products (£m APE), 2010-14 19
Table 5: The top 20 term assurance competitors, new business premiums (£m APE), 2009 30
Table 6: The top 20 critical illness competitors, new business premiums (£m APE), 2009 32
Table 7: The top 20 whole of life competitors, new business premiums (£m APE), 2009 34
Table 8: The top 20 competitors, new business premiums (£m APE), 2009 36
Table 9: Distribution channels, new business premiums (£m APE), 2005-09 39
Table 10: Protection market distribution channel forecast, new business premiums (£m APE), 2010-14 42
List of Figures
Figure 1: The protection suite 6
Figure 2: Savings related term assurance accounted for the largest portion of new business written in 2009 11
Figure 3: Savings related term assurance is up on previous levels 12
Figure 4: CII term with rider continues to dominate the rider market 14
Figure 5: The regular premium life market is set to grow over the next five years 16
Figure 6: Over 40% of respondents think that they do not need life assurance or income protection 21
Figure 7: Aviva offers free whole of life cover to new parents 26
Figure 8: Legal & General commands the largest term assurance market share 29
Figure 9: Royal London Mutual has overtaken L&G in critical illness new business 31
Figure 10: CIS held the highest market share of new business in 2009 for whole of life 33
Figure 11: HSBC was the dominant income protection provider in 2009 35
Figure 12: IFAs continue in their role as the dominant distribution channel 38
Figure 13: Internet access is increasing year-on-year 40
Figure 14: The single tie and non-intermediated channels are set to grow 42
Figure 15: Bancassurance is losing out to the dominant IFA channel 43

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