Mintel’s research shows that consideration of life insurance increased by 5 percentage points in 2020 when compared with 2019. Over half who are interested in taking out cover indicate that the COVID-19 outbreak has made them more likely to consider the issue. Given the broader economic climate, this interest is unlikely to lead to a sudden significant increase in ownership of life insurance, but at the very least, this shows a growing level of interest and engagement in the product.

In the short term, it is expected that the COVID-19 outbreak will lead to a decline in life insurance sales. This is due to the stifling effect that the outbreak has had on the mortgage market during lockdown and the direct impact this had on cross-sale opportunities. Longer term, it is expected that as consumer confidence returns and the mortgage market rebounds, sales of life insurance will return to growth at levels seen prior to the crisis.

Although the outbreak has led to increased interest and engagement in the product, changes to underwriting processes to reflect the increased risk of the virus have further restricted access to cover for higher-risk groups. If, as seems likely, we have to live with this virus for an extended period of time, not only will these restrictions harm growth in the market, they could also cause reputational damage to the industry.

Currently ownership of life insurance among both renters and the self-employed is worryingly low. By targeting these specific groups, providers have an opportunity to significantly increase the penetration of life insurance. Partnerships, such as those between Legal & General and Tenant Shop Financial Services, reflect a shift towards providers actively looking to engage renters. However, further product development and innovation is required to successfully target these groups.

• The impact of COVID-19 on the term assurance market and the outlook for the market.

• Consumer interest in term assurance and likelihood to purchase.

• Triggers for taking out cover and the purchase journey preferences.

• Opportunities and threats arising from the COVID-19 pandemic.

The first COVID-19 cases were confirmed in the UK at the end of January, with a small number of cases in February. The government focused on the ‘contain’ stage of its strategy, with the country continuing to operate much as normal. As the case level rose, the government ordered the closure of non-essential stores on 20^th March.

A wider lockdown requiring people to stay at home except for essential shopping, exercise and work ‘if absolutely necessary’ followed on 23^rd March. Initially, a three-week timeframe was put on the measures, which was extended in mid-April for another three weeks.

The Health Protections Regulations 2020 came into effect on 15^th June allowing the reopening of all non-essential stores in England as well as the mandatory use of face coverings on public transport. Pubs, restaurants, hotels and hairdressers were able to reopen on 4^th July, with many beauty businesses following on 13^th July.

From 24 July, it became mandatory to wear face coverings in shops and supermarkets. Rules on travel remain fluid: from 10 July, travellers from more than 50 “low risk” countries no longer had to self-isolate for 14 days, but on 28 July the removal of Spain from this list of low-risk countries dominated headlines in the UK.

From the 14th September more stringent limits on mixing between households were imposed across the UK, although the rules vary between the home nations. It is hoped this will help to limit the rising level of infections seen at the end of August and start of September. Local lockdown measures have been implemented in areas with high infection rates, and this is likely to be extended to more areas over the autumn and winter months in order to protect NHS services.

Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its July 2020 Fiscal Sustainability Report. The scenario suggests that UK GDP could fall by 12.4% in 2020, recovering by 8.7% in 2021, and that unemployment will reach 11.9% by the end of 2020, falling to 8.8% by the end of 2021.

The current uncertainty means that there is wide variation on the range of forecasts, however, and this is reflected in the OBR’s own scenarios. In its upside scenario, economic activity returns to pre-COVID-19 levels by Q1 2021. Its more negative scenario, by contrast, would mean that GDP doesn’t recover until Q3 2024.

For the purposes of this Report, Mintel has used the following definitions:

Term assurance is a common type of life insurance policy, providing cover for a limited period and hence will only pay out if the policyholder dies within that term or, in the case of some policies, is diagnosed with a terminal illness.

This contrasts with whole-of-life assurance (including over-50s guaranteed acceptance plans), which is designed to cover an individual during their entire life and is thus guaranteed to always pay out.

Term assurance policies can be written on a single life, joint life (first or second death) or on a life of another basis. They are primarily used to cover the financial responsibilities for the insured and/or their beneficiaries, the most common of which is a mortgage. Indeed, many people take out term assurance when they buy their first home, linking the term of the policy with the term of the loan (typically 25-30 years). Hence, the market comprises two distinct product segments:

• mortgage term assurance (where the sum insured correlates with the outstanding mortgage balance and is, therefore, usually arranged on a decreasing term basis)

• other term assurance (where the sum insured is not linked to a mortgage and is usually arranged on a level-term basis).

Both of these product types can be further subdivided into:

• Decreasing term assurance (where the sum insured decreases over the term, thereby reducing the cash payout the longer the term runs) is often taken out by repayment mortgage holders to cover their outstanding mortgage balance should they die during the mortgage term.

• Level-term assurance policies (where the sum insured remains the same over the duration of the policy term) tend to be more expensive than decreasing term policies.

Premiums are based primarily on the age and health of the life assured, the sum assured and the policy term. The older the life assured or the longer the policy term, the higher the premium will generally be.

Family income benefit is similar to traditional term assurance, but rather than providing beneficiaries with a lump-sum payout, it provides them instead with a fixed, tax-free, regular income. The income payments are usually paid on a monthly basis and run from the date of death, until the end of the policy term, as chosen at the outset by the policyholder.

Critical illness cover is often sold as an add-on or ‘rider’ to term assurance. It is designed to pay a lump sum to the policyholder on the diagnosis of certain life-threatening but not necessarily fatal conditions such as heart attack, stroke, certain cancers, multiple sclerosis, loss of limbs, etc. It can be bought on its own (ie as a standalone policy).

Income protection is a long-term policy that is designed to replace a proportion of lost earnings in the event that the policyholder is unable to work due to sickness, accident or injury. Subject to certain conditions and level of cover, the insurer will pay, after a pre-agreed deferred period (eg four, eight, 13, 26 or 52 weeks), a tax-free monthly benefit to the policyholder if they are too ill to work. The amount will usually be equivalent to between 50% and 65% (but can be up to 75%) of the individual’s gross earnings and is paid until the policyholder reaches their selected retirement age (usually between 50 and 70), or their recovery or death if these are sooner. The monthly premiums are determined via a detailed and personalised underwriting approach, and are usually fixed for the term of the policy. The longer the deferred period selected, the lower the premium.

This type of cover is also known as permanent health insurance or family income benefit and can be held jointly. It should not be confused with ASU insurance (see below).

ASU (accident, sickness and unemployment) insurance is designed to provide cover for accidental death, disability and sickness, as well as unemployment, for a limited period. In the event of a claim, benefits are typically paid out on a monthly basis for up to a maximum of one or two years (unlike with an income protection policy, which is designed to pay out until the insured’s specified retirement age). As with other types of insurance, cover can be extended to a partner and/or children. This product is sometimes marketed as a form of short-term ‘income protection’.

Related short-term policies include those that only cover sickness and/or accident, as well as mortgage protection insurance.

The vast majority of protection business is generated by intermediaries, on an advised basis. Following new regulation, linked to the Retail Distribution Review, introduced on 1 January 2013, intermediaries are now categorised into two main groups:

Independent – an adviser or firm that is able to consider and recommend all types of product from all firms across the whole market.

Restricted – an adviser or firm that only recommends certain products, product providers or both. This category includes tied advisers, where the firm or adviser works with one or a select number of product providers and only considers products within that limited range. It also includes those who specialise or focus on a particular market, such as protection or pensions (even where they consider the full range of products from all providers within that market segment).