Table of Contents
Executive Summary
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- The Market
- Income protection sales to experience sharp drop in sales in 2020
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- Figure 1: Forecast of new individual (long-term) income protection sales, adjusted for COVID-19 – Fan chart 2014-24
- Mortgage channels drive increased sales in 2019
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- Figure 2: New individual income protection sales and average premium, 2015-19
- Total loans for house purchases fell in 2019
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- Figure 3: Volume of house purchase loans, by type of borrower, 2013-19
- Impact of COVID-19 on the income protection market
- Short term pain but long term gain
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- Figure 4: Expected impact of COVID-19 on Income protection, short, medium and long term, [30 April 2020]
- Companies and brands
- Providers react to COVID-19 outbreak
- Aviva dominates the market in 2018…
- …while Legal & General grow new sales by over 50%
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- Figure 5: Estimated market shares of the top five providers of new individual income protection, based on volume sales, 2018
- LV= and Legal & General target the rental market
- New propositions for the self-employed
- IPTF introduces a new Seven Families Campaign
- The consumer
- One in 10 say they own income protection
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- Figure 6: Protection product ownership, February 2020
- Pre-COVID-19 signs that financial resilience was improving
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- Figure 7: Expected impact of loss of income on financial stability, February 2020
- A quarter of workers without cover would consider income protection
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- Figure 8: Interest in income protection, February 2020
- Flexible policy terms are the most important benefit
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- Figure 9: Important income protection policy features, February 2020
- Frequently changing lifestyles are a barrier to ownership
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- Figure 10: Barriers to ownership of income protection, by interest in income protection, February 2020
- What we think
The Impact of COVID-19 on Income Protection
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- Short, medium and long-term impact on the industry
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- Figure 11: Expected impact of COVID-19 on Income protection, short, medium and long term, 30 April 2020
- Opportunities and Threats
- Short term pain but long term gain
- COVID-19 provides a focus for discussions about financial resilience
- Reshaping the protection landscape
- Wellbeing takes on new significance
- Providers face a tricky balancing act in response to crisis
- Impact on the income protection market
- Sales will decline sharply in 2020, but recovery expected from 2021
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- Figure 12: Forecast of new individual (long-term) income protection sales, adjusted for COVID-19 – Fan chart 2014-24
- Shifts in consumer behaviour
- Household finances held up in April…
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- Figure 13: The financial well-being index, January 2016-April 2020
- …but confidence in the year ahead dropped sharply
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- Figure 14: The financial confidence index, January 2016-April 2020
- Impact on key consumer segments
- Higher income groups are more likely to weather the storm
- Self-employed workers are more likely to identify a need for post-COVID-19 cover
- Mortgage holders and parents will seek reassurance
- How a COVID-19 recession will reshape the industry
- Rising unemployment will damage prospects in the short-term
- A different type of recession for lenders…
- …and better prospects for a recovery for insurers
- Impact on the Marketing Mix
- Distribution strategies will change in light of COVID-19
- Lockdown could prove the tipping point for remote advice channels
- Flexible options needed to widen engagement
- Scope for cheaper starter policies but comprehensive policies will still have a place
- COVID-19: Market context
Issues and Insights
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- Providers face a balancing act when developing engagement in the wake of COVID-19
- The facts
- The implications
- More distinction is needed between self-employed and gig economy worker needs
- The facts
- The implications
The Market – What You Need to Know
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- The mortgage market drives increased sales in 2019
- Total loans for house purchases falls
- Less than 20% are covered until retirement
- IPTF introduces a new Seven Families Campaign
Market Size and Forecast
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- Strong increase in sales in 2019
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- Figure 15: New individual income protection sales and average premium, 2015-19
- Group contracts continue to perform strongly
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- Figure 16: Volume and value of new group income protection sales, 2015-19
- COVID-19 market forecast
- The market is expected to recover from an initial decline
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- Figure 17: Forecast of new individual (long-term) income protection sales, adjusted for COVID-19 – Fan chart 2014-24
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- Figure 18: Forecast of new individual (long-term) income protection sales, adjusted for COVID-19 – Fan chart 2014-24
- Figure 19: Forecast of new individual (long-term) income protection premiums, adjusted for COVID-19 – Fan chart 2014-24
- Figure 20: Forecast of new individual (long-term) income protection premiums, adjusted for COVID-19 – Fan chart 2014-24
- Pre-COVID-19 forecast: market forecast to continue recent growth
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- Figure 21: Forecast of new individual (long-term) income protection sales – Fan chart 2014-24
- Figure 22: Forecast of new individual (long-term) income protection sales, 2014-24
- Figure 23: Forecast of new individual (long-term) income protection premiums – Fan chart 2014-24
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- Figure 24: Forecast of new individual (long-term) income protection premiums, 2014-24
- Forecast methodology
Channels to Market
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- Independent channels increase their market share
- Restricted and non-advised sales also increased in 2019
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- Figure 25: Distribution of new individual (long-term) income protection premiums and contracts, 2015-19
- The bancassurance market remains static
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- Figure 26: Value of new income protection (long-term) bancassurance premiums, 2015-19
Market Drivers
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- Total loans for house purchases falls for the second consecutive year
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- Figure 27: Volume of house purchase loans, by type of borrower, 2013-19
- Sales through mortgage channels were on the rise
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- Figure 28: New sales of income protection products, by FCA firm type, 2016- 2019
- The self-employed population continues to grow
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- Figure 29: UK percentage growth for employees and self-employed men and women aged 16 and over, 2010-20
- Earnings continue to outpace inflation
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- Figure 30: Average weekly earnings growth vs inflation, January 2010-January 2020
- Over 90% of policies have a five-year benefit term
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- Figure 31: Income protection policies, by benefit term, 2018
- Number of new claims paid doubles in 2018
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- Figure 32: Number of new claims paid vs average value of new claims paid, 2015-18
Regulatory and Legislative Changes
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- IPTF unveils a new Seven Families Campaign
- The FCA warns against penalising customers following COVID-19
- Further clarification required over Universal Credit and income protection
Companies and Brands – What You Need to Know
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- Aviva dominated the market in 2018…
- …while Legal & General grew new sales by half
- LV= and Legal & General target the rental market
- New propositions for the self-employed
- Providers enhance affordability and flexibility
Market Share
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- Aviva continues to dominate the market
- Legal & General increases new sales by 50% to take second place
- LV= grows new income protection business by one fifth in 2019
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- Figure 33: Estimated market shares of the top five providers of new individual income protection, based on volume sales, 2018
- Figure 34: Gross earned premiums of the top individual income protection providers, 2018
- The Exeter continues to lead the way among Friendly Societies
Competitive Strategies
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- New propositions target the rental sector…
- …and the self-employed
- Increased access for mental health patients
- Providers increase affordability and flexibility
- New enhancements for NHS workers
- New solution enables advisers to compare benefits better
The Consumer – What You Need to Know
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- One in 10 say they own income protection
- Pre-COVID-19 signs that financial resilience was improving
- Flexible policy terms are the most important benefit
- Regularly changing lifestyles are a barrier to ownership
- Affordability is the major issue for the less financially resilient
Protection Product Ownership
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- Income protection remains the third most popular type of cover
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- Figure 35: Protection product ownership, February 2020
- Ownership of protection much higher among those with significant savings
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- Figure 36: Protection product ownership, by level of savings and investments, February 2020
Expected Impact of Loss of Income on Finances
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- Pre-COVID-19 signs that financial resilience was improving
- Younger Millennials and renters are the most vulnerable
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- Figure 37: Expected impact of loss of income on financial stability, February 2020
- Self-employed workers show some resilience
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- Figure 38: Expected impact of loss of income on financial stability, February 2020
Interest in Income Protection
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- One in four would consider income protection
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- Figure 39: Interest in income protection, February 2020
- Long-term policies remain the preferred option…
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- Figure 40: Preferred length of income protection policy, February 2020
- …even among those who require short-term cover
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- Figure 41: Preferred length of income protection policy, by expected loss of income on financial stability, February 2020
Important Policy Factors
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- Flexible policy terms are highlighted as the most important…
- …but people are looking for more from their policy
- Parents prioritise additional cover for family
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- Figure 42: Important income protection policy features, February 2020
- Quality comes before price
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- Figure 43: Important factors when choosing income protection, February 2020
Barriers to Ownership of Income Protection
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- Frequently changing circumstances are a major obstacle
- A lack of understanding is a barrier to entry
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- Figure 44: Barriers to ownership of income protection, by interest in income protection, February 2020
- Barriers reflect level of financial resilience
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- Figure 45: Barriers to ownership of income protection, by expected impact of loss of income on financial stability, February 2020
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
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- Figure 46: Forecast of new individual (long-term) income protection sales (pre-COVID-19), 2019-24
- Figure 47: Forecast of new individual (long-term) income protection premiums (pre-COVID-19), at current and constant prices, 2019-24
- Forecast methodology
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