Table of Contents
Introduction
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- Abbreviations
Executive Summary
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- The market
- Number of authorised retail intermediaries
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- Figure 1: Number of FSA directly authorised retail intermediary firms, by primary category*, June 2008-June 2011
- Term assurance distribution
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- Figure 2: Total new premiums (£m) for individual regular-premium term assurance policies written, by distribution channel, 2005-11 (H1)
- Critical illness distribution
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- Figure 3: Total new premiums (£m) for individual CI rider benefit policies written, by channel, 2005-10
- Income protection distribution
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- Figure 4: Total new premiums (£m) for individual IP premiums policies written, by distribution channel, 2009-2011 (H1)
- Market factors
- Stuttering economy remains a challenge to new business
- A decline in mortgage lending has made it more difficult to sell protection products
- Uncertainty about the effect of the RDR on protection sales
- Complaints to the FOS about IFAs fall to 1.5% of total complaints about FS firms
- The adviser’s viewpoint
- Barriers to generating new life and protection business
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- Figure 5: Barriers to selling life and protection products, July 2011
- Provider support
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- Figure 6: Developments which IFAs feel would make it easier to sell life and protection products to clients, July 2011
- Confidence and future intentions
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- Figure 7: IFA future plans over the next 12 months, Q2 2011
- Impact of the RDR on advisers’ business
- What we think
Issues in the Market
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- Can providers and intermediaries remarket life and protection products in order to change consumer attitudes?
- How can intermediaries and providers deal with consumer scepticism?
- What does uncertainty in the advisory landscape mean for life and protection sales?
- Are direct sales a threat to intermediated distribution of life and protection products?
Future Opportunities
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- An open approach to life and death
- Online forums can help to increase transparency and boost trust
Internal Market Environment
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- Key points
- Life assurance gap remains at £2.4 trillion in 2010…
- … while the income protection gap remains at £190 billion
- Consumer engagement and trust is lacking
- The onus is on providers and intermediaries to change perceptions
- IP market could benefit from publishing claims statistics
- Consumer Insurance Bill set to address payout disputes
- Welfare reforms could boost demand for protection products
Broader Market Environment
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- Key points
- Economic uncertainty has increased consumer caution
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- Figure 8: GDP quarterly percentage change, Q1 2004-Q2 2011
- A faltering housing market is holding back sales
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- Figure 9: Residential housing transactions (seasonally adjusted), Q2 2006-Q2 2011
- Increasing life expectancy helps to push down premiums
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- Figure 10: Cohort life expectancy at age 60, by gender, 1981-2058
- Growing number of ABs is positive for providers
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- Figure 11: Forecast adult population trends, by socio-economic group, 2006-16
Regulatory Environment
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- Key points
- RDR is causing many IFA firms to leave the market…
- ...but focus on life and protection products is set to intensify
- Capital adequacy rules pushed back by two years to December 2015
- Complaints about IFAs fall to 1.5%
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- Figure 12: Financial services firms complained about, by sector, 2006/07-2010/11
Swot
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- Figure 13: Life and protection – SWOT analysis, 2011
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Who’s Innovating?
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- Key points
- Slider tool launched by The Life Department
- Ageas Protect and Asda unveil new partnership
- L&G announces new protection app for the iPad and iPhone
- Gender neutral IP plan already available to consumers
- LV= aims to offer lowest IP premiums
- Sesame Bankhall Group launches a new customer feedback system
Intermediary Marketplace
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- Key points
- The number of directly authorised firms continues to decline
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- Figure 14: Number of FSA directly authorised retail intermediary firms, by primary category*, June 2008-June 2011
- Uncertainty about the impact of RDR on protection advice
- Number of GI appointed representatives increases by 4%
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- Figure 15: Number of directly authorised financial advice firms, June 2008-June 2011
Protection Market Size
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- Key points
- Term assurance
- Stability in the market expected during 2011
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- Figure 16: Volume and value of new individual regular-premiums term assurance policy sales, 2005-11
- Focus has shifted towards non-mortgage-related policies
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- Figure 17: Volume and value of new individual regular-premium term assurance policy sales, by policy type, 2005-10
- Critical illness
- New individual sales are expected to rise again in 2011
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- Figure 18: New individual CI sales, by volume and value, 2007-11
- The majority of critical illness sales are sold with other insurance
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- Figure 19: New individual CI sales, by type, by volume and value, 2007-11
- Most CI policies sold alongside term assurance
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- Figure 20: New individual CI rider benefit sales, by volume and value and type of insurance, 2006-11
- Income protection
- Market growth is expected in 2011 but average premiums should fall
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- Figure 21: New individual income protection sales, by value and volume, and average annual premiums, 2007-11
Distribution Overview
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- Key points
- Access to advice is very important for life and protection sales
- Term assurance
- IFAs dominate non-mortgage-related distribution
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- Figure 22: Total new premiums for individual regular-premium term assurance policies written, by distribution channel and policy type, 2005-11 (H1)
- Critical illness
- Intermediaries play a big role in new CI rider benefit sales
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- Figure 23: Distribution of new individual CI rider benefit premiums, by channel, 2005-10
- Majority of standalone CI premiums generated by IFAs
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- Figure 24: Distribution of new individual standalone CI premiums, by channel, 2005-11 (H1)
- Income protection
- 2011 first-half figures show that 53.8% of new IP premiums are IFA-generated
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- Figure 25: Distribution of new individual IP premiums, by distribution channel, 2009-2011 (H1)
- Direct sales play a small part in the life and protection markets
Key Intermediary Players
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- The Tenet Group
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- Figure 26: Key financial data for Tenet Group Ltd, 2009-10
- Sesame Bankhall Group
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- Figure 27: Key financial data for Sesame Bankhall Group Limited, 2009-10
- Openwork
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- Figure 28: Key financial data for Openwork Limited, 2008-09
- Intrinsic Financial Services
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- Figure 29: Key financial data for Intrinsic Financial Services Limited, 2008-09
- Personal Touch Financial Services
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- Figure 30: Key financial data for Personal Touch Financial Services Limited, 2008-09
- Honister Capital
Brand Communication and Promotion
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- Key points
- Adspend continues to decline in 2010/11
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- Figure 31: Overview of total adspend on protection products, 2008/09-2010/11*
- Life protection advertising accounts for the majority of adspend
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- Figure 32: Adspend on protection products, by category, 2008/09-2010/11
- Aviva has the biggest adspend in the life and protection markets
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- Figure 33: Top 15 advertisers of protection products, 2010/11
- Direct mail and TV are the most popular methods of advertising
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- Figure 34: Overview of media type used to advertise protection products, 2010/11
- Advertising in intermediary and trade press grows by 5.7%
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- Figure 35: Adspend in intermediary and trade press*, 2009/10-2010/11
The IFA: Barriers to Generating New Life and Protection Business
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- Key points
- Recession is the number-one barrier to life and protection sales
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- Figure 36: The main barriers when it comes to trying to sell protection and life insurance products to clients, 2010 and 2011
- Trust and education is lacking among consumers
- Competition from insurers restricting advisers
The IFA: Provider Support
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- Key points
- Improvements to application and underwriting processes top IFAs’ wish lists…
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- Figure 37: What insurers could do to make it easier for IFAs to sell protection products and life insurance to their clients, 2010 and 2011
- ...however, some complexity is beneficial to advisers
- Increasing number of IFAs want to see consumer-focussed marketing
- Insurers’ online resources help IFAs keep up to date with developments
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- Figure 38: How IFAs prefer to keep up to date with developments in the life and protection markets, 2010 and 2011
The IFA: Confidence and Future Intentions
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- Key points
- IFAs are more positive about own business prospects than of the financial services market…
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- Figure 39: IFA confidence about own business prospects and overall financial services market compared to six months prior, Q2 2011
- …however there is a mixed picture in comparison to last year
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- Figure 40: Confidence about own business prospects compared to six months prior, Q2-Q3 2010 and Q2 2011
- Three in five IFAs plan to shift the balance of their business to recurring income
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- Figure 41: IFA future plans over the next 12 months, Q2 2011
- Merger & acquisition activity expected to continue among IFAs
The IFA: Impact on Business
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- Key points
- A larger number of IFAs feels that the RDR will have a negative impact on their business…
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- Figure 42: Opinions on the impact of the Retail Distribution Review on IFA business, Q3 2010 and Q2 2011
- …however this could be good news for the life and protection markets
- Half of IFAs feel that the reputation of the FS industry will have no impact on business
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- Figure 43: Opinions on the impact of the reputation of the financial services industry on IFA business, Q2 2011
- Consumer confidence in the housing market is a concern for IFAs
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- Figure 44: Opinions on the impact of consumer confidence in the housing market on IFA business, Q2 2011
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