27% of UK adults without critical illness cover would consider taking it out in the future. This marks a six percentage point increase compared to 2019 reflecting the impact of COVID-19. However, without improving consumer understanding of the product and building trust, providers risk letting this opportunity to increase engagement pass.

The uniquely widespread impact of COVID-19 has prompted people to consider their financial resilience in a way they may not have done before. Although sales have declined in the immediate aftermath of the outbreak, over the longer-term increased awareness of the need to protect dependents should drive greater interest in critical illness as both a standalone product, and as a rider to other protection policies.

Despite attempts to demonstrate the proportion of claims paid, trust in providers to pay-out in the event of a claim remains low and this is clearly an obstacle to purchase for many consumers. In some ways the pandemic has made the situation worse. The introduction of underwriting restrictions early in the pandemic limited access to the product. Meanwhile, negative press relating to pay-outs for business interruption insurance, travel insurance and wedding insurance, will have reinforced the negative perception many people hold about the industry more generally.

Consumers’ knowledge and understanding of critical illness cover is low. This hasn’t been helped in recent years by the continuous adding of conditions to policies, which has overcomplicated the product. The industry is taking serious steps to overcome this by simplifying policies but the key to success will be in how the product can be effectively communicated to consumers.

• The impact of COVID-19 on the critical illness cover market.

• The size of the critical illness cover market.

• Ownership and interest in critical illness cover.

• Consumers’ perception of financial resilience, and sources of funding if people were unable to work due to ill-health.

• Purchase triggers for critical illness cover.

• Preferred channels used when taking out critical illness cover.

• Knowledge and understanding of critical illness cover.

The first COVID-19 cases were confirmed in the UK at the end of January 2020, 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 March.

By September, it had become clear that the UK was at the start of a second wave, and social distancing measures were intensified. Continued increases in infection numbers led to Wales implementing a two-week national lockdown from 19 October, England announcing a month-long lockdown from 5 November, and Scotland introducing a new five-level system of coronavirus restrictions.

Despite these restrictions, however, case numbers continued to increase. All four UK nations tightened restrictions in January 2021, effectively leading to a full UK-wide lockdown.

On 22 February 2021, Boris Johnson announced the roadmap to an easing of restrictions in England, starting with the re-opening of schools on 8 March, followed by easing of restrictions on outdoor gatherings on 29 March, and with a hope end to all restrictions by 21 June. The Welsh and Scottish governments also gave more details on their plans to ease restrictions, with both nations taking a slightly more cautious approach to the one planned for England.

The UK’s vaccination programme started on 8 December 2020, and with the Pfizer-BioNTech, Moderna and Oxford-AstraZeneca vaccines licenced for use in the UK, the government aims to offer a first dose of the vaccine to 32 million people by mid-April.

Mintel’s economic assumptions are based on the OBR’s central scenario included in its November 2020 Fiscal Sustainability Report. The scenario suggests that UK GDP will have fallen by 11.3% in 2020, recovering by 5.5% in 2021, and 6.6% in 2022. GDP isn’t expected to return to pre-COVID levels until the fourth quarter of 2022. The central scenario has unemployment peaking at 7.5% in Q2 2021.

The current uncertainty, however, means there is wide variation on the range of forecasts, and this is reflected in the OBR’s own scenarios. In its upside scenario, economic activity returns to pre-COVID-19 levels by Q4 2021. Its more negative scenario, by contrast, would mean that GDP doesn’t recover until Q3 2024.

The second wave of infections and subsequent lockdowns means that the short-term prospects for the country are consistent with the OBR’s negative scenario, but this needs to be balanced against the vaccine rollout progressing ahead of even the OBR’s central scenario. Medium to long term, we are therefore still basing our forecasts and market analysis on the OBR’s central economic scenario.

This Report examines the UK market for individual critical illness cover.

Critical illness cover is a long-term policy designed to pay a tax-free lump sum to the policyholder on the diagnosis of specified illnesses and medical conditions such as cancer, heart attack and stroke. The number and range of medical conditions covered can vary considerably between insurers and even between policies from the same insurer.

Critical illness cover can be purchased on its own (as a standalone policy) but is more commonly bought alongside other types of insurance (as a ‘rider’ benefit) such as term assurance. It can be taken out on a joint or single basis, and some policies also cover children either as standard or as an optional extra. Policies can either be linked to a mortgage term or be separate.

The focus of this Report is critical illness insurance, but it also references related products such as term assurance and income protection. For more detail on these specific products see:

• Mintel’s Term Assurance – UK, September 2020 Report

• Mintel’s Income Protection – UK, April 2020 Report