Table of Contents
Executive Summary
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- Impact of COVID-19 on the protection market
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- Figure 1: Short-, medium- and long-term impact of COVID-19 on critical illness cover, March 2020
- The market
- Premiums decline in 2020
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- Figure 2: New individual critical illness policies and premiums, 2015-20
- Market will return to 2019 levels in 2023
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- Figure 3: Market size and forecast of new individual critical illness premiums, at current prices, 2015-25
- Differing fortunes for critical illness sold as a rider, and standalone policies
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- Figure 4: Market segmentation, 2016-20
- Non-advised sales grow in importance among standalone policies
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- Figure 5: Channels to market for new critical illness policies, by market segmentation, 2020
- Total property transactions fall in 2020
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- Figure 6: UK residential property transactions over £40,000, 2015-20
- Increased waiting times leads to falling claims
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- Figure 7: Percentage of patients in England waiting over six weeks for diagnostic tests and procedures, October 2019-December 2020
- Companies and brands
- Legal & General remained the market leader despite a decline in sales in 2019
- 2020 sees a dramatic shift away from the ‘conditions race’…
- … and greater focus on children’s critical illness cover
- The consumer
- Little change in ownership in 2020…
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- Figure 8: Protection product ownership, December 2019 V December 2020
- …and in perceptions of financial resilience
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- Figure 9: Financial Resilience, December 2019 V December 2020
- Increasing reliance on savings and sick pay
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- Figure 10: How people would fund a period of illness or disability, December 2019 V December 2020
- Consideration increases in 2020
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- Figure 11: Consideration of critical illness cover, December 2019 V December 2020
- Financial advice and moving home are the main triggers for purchasing cover
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- Figure 12: Critical illness cover purchase triggers, December 2020
- Those who are considering cover risk waiting until it is too late
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- Figure 13: Potential critical illness purchase triggers, December 2020
- Online financial advice is more of a factor for those very likely to take out cover
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- Figure 14: Preferred channels when taking out a critical illness policy, December 2020
- Greater understanding is required
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- Figure 15: Attitudes towards critical illness cover, December 2020
Issues and Insights
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- COVID-19 drives an interest in critical illness cover
- Overcoming trust issues demands new thinking
- Simplification can future-proof the product
The Market – Key Takeaways
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- Critical illness sales fall in 2020…
- …but standalone policy sales increase
- Claims are expected to fall sharply
Market Size and Forecast
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- Impact of COVID-19 on Critical Illness Cover
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- Figure 16: Short-, medium- and long-term impact of COVID-19 on critical illness cover, March 2020
- A hugely challenging year leads to a sharp decline in premiums
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- Figure 17: New individual critical illness policies and premiums, 2015-20
- Growth is forecast to return in 2021
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- Figure 18: Market size and forecast of new individual critical illness premiums, at current prices, 2015-25
- Figure 19: Market size and forecast of new individual critical illness premiums, at current prices, 2015-25
- Market drivers and assumptions
- Learnings from the last recession
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- Figure 20: Total new individual critical illness premiums, at current prices, 2007-12
- Forecast methodology
Market Segmentation
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- Mortgage term and other term policies decline sharply…
- …but standalone policies have increased by almost a fifth
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- Figure 21: Market segmentation, 2016-20
- The cross-sell rate falls sharply for other term policies
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- Figure 22: Critical illness rider cross-sell rate, 2016-20
Channels to Market
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- Increased reliance on independent advice in 2020…
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- Figure 23: Channels to market for new critical illness policies, 2016-20
- …due to mortgage term and other term linked policies
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- Figure 24: Channels to market for new critical illness policies, by market segmentation, 2020
Market Drivers
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- A sharp fall in property transactions in 2020
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- Figure 25: UK residential property transactions over £40,000, 2015-20
- NHS waiting times increase dramatically
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- Figure 26: Percentage of patients in England waiting over six weeks for diagnostic tests and procedures, October 2019-December 2020
- Claims are expected to have fallen sharply in 2020
- COVID-19 was the leading cause of death in 2020
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- Figure 27: Top 10 leading causes of death in the UK from 1 January to 31 December 2020
- A period of high unemployment will harm the market
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- Figure 28: Annual unemployment rate, 2015-25
Companies and Brands – Key Takeaways
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- The race for simplicity steps up
- Greater focus on children’s critical illness cover
- Improved access for renters
Market Share
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- Despite a decline, Legal & General remains the market leader
- Aviva grows sales in first half of 2020
- Zurich increases sales in 2019
- Vitality and Royal London see a decline in new business
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- Figure 29: Volume sales and market shares of the top five providers of new individual critical illness cover, 2018 and 2019
Competitive Strategies
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- 2020 signifies a shift toward simplicity
- Scottish Widows completely overhauls its proposition
- Vitality reacts to concerns about over-complexity
- AIG announces it has exited the ‘conditions race’
- Brands introduce a raft of children’s critical illness enhancements
- Scottish Widows unveils its ‘mini body’ image
- LV= adds enhanced children’s cover to its flexible protection plan
- Royal London introduces a new ‘conversion option’
- Improved access for renters
The Consumer – Key Takeaways
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- The high level of financial resilience might be overstated
- COVID-19 increases interest in critical illness cover
- Encourage people to take action before it’s too late
- Improving knowledge and understanding should be a priority
Impact of COVID-19 on Consumer Behaviour
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- 17% are financially better off than they were at the start of the outbreak
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- Figure 30: Change in financial situation since the COVID-19 outbreak, November 2020
- Increase in financial confidence in 2021
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- Figure 31: The financial confidence index, January 2015-February 2021
- Increased focus on protecting friends and family
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- Figure 32: Change in priority of staying in touch with friends/family since the COVID-19 outbreak, 4-12 February 2021
Protection Product Ownership
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- Little change in ownership in 2020
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- Figure 33: Protection product ownership, December 2019 V December 2020
- Reaching non-mortgage holders remains a challenge
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- Figure 34: Ownership of critical illness cover, by housing situation, December 2020
Financial Resilience
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- COVID-19 has done little to change perspectives
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- Figure 35: Financial Resilience, December 2019 V December 2020
- Gen Xers and Baby Boomers are most likely think they will manage
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- Figure 36: Financial Resilience, by generation, December 2020
Sources of Funding for Lost Income
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- Increased reliance on savings…
- …and sick pay
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- Figure 37: How people would fund a period of illness or disability, December 2019 V December 2020
- Millennials are more likely to rely on less reliable sources
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- Figure 38: How people would fund a period of illness or disability, by generation, December 2020
Consideration of Critical Illness Cover
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- Significant increase in consideration in 2020
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- Figure 39: Consideration of critical illness cover, December 2019 V December 2020
- Financial resilience brings consideration
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- Figure 40: Consideration of critical illness cover, by financial resilience, December 2020
- Those who would rely on debt are most likely to take out cover
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- Figure 41: Consideration of critical illness cover, by source of funding of lost income, December 2020
Purchase Triggers for Critical Illness Cover
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- Advice and moving home are the main triggers for purchasing cover
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- Figure 42: Critical illness cover purchase triggers, December 2020
Potential purchase triggers for Critical Illness Cover
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- Those who consider cover may wait until it’s too late…
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- Figure 43: Potential purchase triggers for critical illness cover, December 2020
- …particularly among the less resilient
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- Figure 44: Potential purchase triggers for critical illness cover, by financial resilience, December 2020
- Traditional triggers are more of a factor for those very likely to take out cover
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- Figure 45: Potential purchase triggers for critical illness cover, by consideration of critical illness cover, December 2020
- Moving home not a trigger for renters
Preferred Channels to Market
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- Online financial advice is more important for those very likely to take out cover…
- …and are also more amenable to the prospect of using their main bank
- Those who are less likely to consider cover will turn to direct channels
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- Figure 46: Preferred channels when taking out a critical illness policy, December 2020
Attitudes towards Critical Illness Cover
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- Over half find policies hard to understand
- A lack of trust is holding people back
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- Figure 47: Attitudes towards critical illness cover, December 2020
- Critical illness cover is perceived to be more important than before
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- Figure 48: Agreement with attitudes towards critical illness cover, by ownership and interest in critical illness cover December 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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- Market forecast methodology
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- Figure 49: Best and worst forecast for value sales of critical illness cover, 2020-25
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