Table of Contents
Overview
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- What you need to know
- Products covered in this Report
Executive Summary
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- The market
- 4.5 million in-force policies
- New business picks up…
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- Figure 1: Forecast of new individual critical illness premiums, at current prices – fan chart, 2012-22
- …underpinned by a buoyant mortgage market
- Policy riders account the majority of new sales
- Growth of non-advised sales
- ABI proposes changes to Guide on Minimum Standards
- Companies and brands
- Legal & General retains market-leader position
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- Figure 2: Estimated market shares of the top five providers of new individual critical illness cover, 2015 and 2016
- Smaller players gain ground
- Recent trends in product development
- Sparse amount invested in above-the-line advertising
- The consumer
- Ownership of protection insurance
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- Figure 3: Ownership of protection insurance products, October 2017
- 75% of policyholders have held their policy for 10 years or less
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- Figure 4: Length of time ago took out critical illness cover, October 2017
- Low awareness of child benefit
- Recent customers are more likely to have approached providers directly
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- Figure 5: Channel used to arrange policy, by when took out policy, October 2017
- Scope to improve customer communication and understanding
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- Figure 6: Agreement with statements about provider communication and policyholder engagement, October 2017
- Cost is a key barrier, but it’s not an issue for everyone
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- Figure 7: Reasons for not having critical illness cover, October 2017
- Most of the non-insured lack an adequate safety-net alternative…
- …and many could face real hardship if the worst happened
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- Figure 8: Ability to cope financially if unable to work for a year or more due to illness, October 2017
- Significant latent demand
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- Figure 9: Likelihood of considering product in the future, by parents and mortgage holders, October 2017
- What we think
Issues and Insights
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- Give prospective customers time to think, and a better idea of cost upfront
- The facts
- The implications
- Is there still potential for hybrid products?
- The facts
- The implications
- Scope to upsell by incentivising policyholders to regularly review cover
- The facts
- The implications
The Market – What You Need to Know
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- 4.5 million in-force policies
- New premiums grow by 8% in 2017
- Growth driven by increase in first-time buyer mortgages
- Policy riders accounted for 92% of sales in 2017
- Non-advised channel sees further growth, albeit from a low base
- ABI issues new draft Guide on Minimum Standards
Market Size and Forecast
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- Mintel estimates there are around 4.5 million policies in force
- New business levels rise again in 2017
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- Figure 10: Volume and value of new individual critical illness sales and average annual premium, 2012-17
- Recent trends and contributing factors
- Average premium stabilises, but for how long?
- Steady premium growth over the next five years…
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- Figure 11: Forecast of new individual critical illness premiums, at current prices – fan chart, 2012-22
- Figure 12: Forecast of new individual critical illness premiums, at current and constant prices, 2012-22
- …with stable volume sales
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- Figure 13: Forecast of new individual critical illness policy sales – fan chart, 2012-22
- Figure 14: Forecast of new individual critical illness contracts, 2012-22
- Forecast methodology
Market Segmentation
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- Most policies are sold as a rider benefit to term insurance
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- Figure 15: New individual critical illness sales – rider benefit versus standalone policies, 2012-17
- Mortgage term customers more likely to take out a critical illness rider
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- Figure 16: Critical illness rider benefits as a proportion of new individual term assurance business, 2012-17
Channels to Market
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- Most sales are intermediated, although direct sales are increasing
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- Figure 17: Volume sales of new individual term insurance policies with critical illness riders, by channel, 2013-17
- Independent advisers grow their share
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- Figure 18: Proportional distribution of new individual term critical illness riders, by channel, 2013-17
- Standalone market sees strong growth in independent advice sales
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- Figure 19: Volume sales of new individual standalone critical illness contracts, by channel, 2014-17
Market Drivers
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- Home purchase loans increased in 2016 and 2017, driven by first-time buyers…
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- Figure 20: Volume of house purchase loans, by type of borrower, 2008-17
- …which likely contributed to the growth in critical illness sales
- Growth of Generation Rent prompts providers to adapt products
- Rising longevity raises risk of ill health in later years
- Industry responds to ABI’s proposed new minimum standards
- Cancer accounts for around two thirds of claims
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- Figure 21: Proportional distribution of claims paid (volume), by critical illness, 2016
- Total cost of critical illness claims reached £976 million
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- Figure 22: Number of critical illness claims paid and declined, value of claims and average claim, 2013-16
Companies and Brands – What You Need to Know
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- Legal & General retains market-leader position
- Smaller players gain ground
- Recent trends in product development
- Sparse amount invested in above-the-line advertising
Market Share
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- Mixed results for the top five in 2016
- Royal London puts in a strong performance following subsidiary rebrand
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- Figure 23: Volume sales and market shares of the top five providers of new individual critical illness cover, 2015 and 2016
- Smaller players increase share
Competitive Strategies
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- Providers regularly tweak products to make them more appealing
- VitalityLife upgrades Serious Illness Cover with Cancer Relapse benefit…
- …and launches Wellness Optimiser
- SunLife and AIG Life take the simple approach
- Providers enhance existing propositions
Advertising and Marketing Activity
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- Minimal above-the-line advertising specifically centred on critical illness
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- Figure 24: Total above-the-line, online display and direct mail advertising expenditure on life protection products, 2013-17
- Other media
- Nielsen Ad Intel coverage
The Consumer – What You Need to Know
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- Parents with a mortgage are most likely to have cover
- 75% of policyholders have held their policy for 10 years or less
- Scope to improve customer communication and understanding
- Recent customers are more likely to have approached providers directly
- Cost is a key barrier, but it’s not an issue for everyone
- Most of the non-insured lack an adequate safety-net alternative
- Significant latent demand
Ownership of Protection Insurance
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- One in 10 adults have critical illness cover
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- Figure 25: Ownership of protection insurance products, October 2017
- Income protection has the potential to supersede critical illness
- The main targets are mortgage holders and parents
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- Figure 26: Ownership of protection insurance products, by parents and mortgage holders, October 2017
Policyholders – Length of Time Held and Lives Covered
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- More than half arranged their policy in the past five years
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- Figure 27: Length of time ago took policy out, October 2017
- Scope to improve take-up of joint policies
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- Figure 28: Lives covered by policy, by when took out policy, October 2017
- Low awareness of child benefit
Policyholders – Channel Used to Arrange Policy
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- Customers who took out their policy post-RDR are more likely to have arranged it directly with an insurer
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- Figure 29: Channel used to arrange policy, by when took out policy, October 2017
Policyholders – Provider Communication and Policy Changes
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- One in six do not understand what their policy covers them for
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- Figure 30: Agreement with statements about provider communication and policyholder engagement, October 2017
- Longer-standing customers are less likely to receive annual communications from their provider…
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- Figure 31: Agreement with statements about policy changes, communication and engagement, October 2017
- …and much less likely to review their cover
Non-policyholders – Reasons for Not Having Cover
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- 39% say they can’t afford it
- 21% don’t want to pay for insurance they may never need
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- Figure 32: Reasons for not having critical illness cover, October 2017
- 15% don’t trust insurers to pay out
- 11% say it’s too difficult working out what is and isn’t covered
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- Figure 33: Reasons for not having critical illness cover, by parents and mortgage holders, October 2017
Non-policyholders – Financial Strength
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- 73% of the non-insured either lack alternative provision or haven’t even considered the matter
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- Figure 34: Level of thought given to how would manage if developed a critical illness, by parents and mortgage holders, October 2017
- Most of those who say they’ve made alternative provision have a modest amount of savings
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- Figure 35: Amount of savings, by non-policyholders, October 2017
- Figure 36: Ownership of protection insurance products, by non-policyholders, October 2017
- Many without cover risk real financial hardship
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- Figure 37: Ability to cope financially if unable to work for a year or more due to illness, by parents and mortgage holders, October 2017
- 25-44-year-olds are at greatest risk
Non-policyholders – Future Product Consideration
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- 58% of non-insured parents would consider taking out cover in the future
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- Figure 38: Likelihood of considering product in the future, by parents and mortgage holders, October 2017
- In conclusion
Appendix – Data Sources, Abbreviations and Supporting Information
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- Product definitions
- Intermediary market definitions
- Abbreviations
- Data sources
- Consumer research methodology
Appendix – Market Size and Forecast
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- Total market value forecast – best- and worst-case scenarios
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- Figure 39: Forecast of new individual critical illness premiums – best- and worst-case scenarios, at current prices, 2017-22
- Total market volume forecast – best- and worst-case scenarios
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- Figure 40: Forecast of new individual critical illness policy sales – best- and worst-case scenarios, 2017-22
- Forecast methodology
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