UK Protection Insurance: Critical Illness & Income Protection

Summary

Individual product performance in the protection market is a turbulent and confusing picture, with erratic premium behavior across the board. While term (and specifically non-mortgage term) products are still the dominant force with over 70% of protection share, there has been downward pressure on every product line in recent times, reflecting the uncertain, fragile national macroeconomic picture. Indeed, in the absence of major market-driven change it is the macro-environment that dictates performance.

Key Findings

-Although the Retail Distribution Review (RDR) was aimed at the retail investment market, and commission-based business is still permitted for protection products, the net effect has been that advisors offering a range of services have had to adapt their models. In addition to RDR, a new emphasis on conduct has been ushered in with the Financial Conduct Authority, and key protagonists in the financial services markets have been overwhelmed with the volume of regulatory change in the last few years.

-Individual product performance in the protection market is a turbulent and confusing picture, with erratic premium behavior across the board. While term (and specifically non-mortgage term) products are still the dominant force with over 70% of protection share, there has been downward pressure on every product line in recent times, reflecting the uncertain, fragile national macroeconomic picture.

Synopsis

Verdict Financials UK Protection Insurance: Critical Illness & Income Protection examines the protection market, focusing on two products: critical illness and income protection. It examines how the market has performed and explores the key drivers shaping the market going forward. It also highlights the impact of RDR and provides a forecast for the next five years.

ReasonsToBuy

-Review your strategy against both existing and new challenges regarding the critical illness and income protection markets.

-See where the opportunities are for digital disruption and how insurers need to respond.

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Table of Contents

EXECUTIVE SUMMARY
Protection has reached a new normal and needs to be reinvigorated
Key findings
Critical success factors
MARKET DYNAMICS
Introduction
The protection market has seen major changes
Protection is sold not bought, making advisors gatekeepers to the market
Contract levels have reduced due to the RDR
Banks have retrenched to core business and reduced their advisory capabilities
Protection products are exhibiting varying performance levels
IP and CII account for a mere 7.2% of the total protection market
Prices rises have sustained the market
The IP sector has struggled to recover its 2012 market position
The product offers significant benefits, but awareness and engagement is low
Confusion exists about the types of cover
The application process is long
Little is done to spread the word on policy benefits
CII penetration is very low, and has been declining
Issues affecting IP also impact CII take-up
The impact of ill health is well publicized
CII is more likely to be added to another protection product
The product has received negative press regarding claims
Like IP, the CII sales process is long
With-rider products significantly expand the CII market
Half of mortgage-related term assurance has CII added
The group life market can detract from individual protection

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