Table of Contents
Executive Summary
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- Impact of COVID-19 on income protection
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- Figure 1: Short, medium and long-term impact of COVID-19 on income protection, April 2021
- The market
- An extended period of growth comes to an end…
- …but the market is set to recover from 2021
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- Figure 2: Market size and forecast for sales of new individual protection policies, by value, 2015-25
- Figure 3: Market size and forecast for sales of new individual protection policies, by volume, 2015-25
- 69% of new business sold via IFAs in 2020
- New schemes helping to support demand for mortgage lending
- Government pressed to offer Universal Credit disregard to renters
- Private rental market has expanded considerably
- Companies and brands
- Aviva retains position as market leader in 2019
- Smaller players gaining market share
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- Figure 4: Market share of the leading providers of individual income protection policies, based on volume sales, 2019
- Providers work to improve access via simpler underwriting and adviser support
- New products launched to appeal to a wider target market
- The consumer
- A tenth of Britons own an income protection policy
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- Figure 5: Protection product ownership, December 2020
- Two in five households would begin to struggle within six months of not working
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- Figure 6: Resilience of household finances, December 2020
- No evidence that interest in income protection has risen during the pandemic
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- Figure 7: Interest in income protection products, February/December 2020
- Just over two fifths of working adults say they are on statutory sick pay
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- Figure 8: Entitlement to sick pay, by age and gender, December 2020
- Cost the main obstacle to policy purchase…
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- Figure 9: Barriers to purchase for income protection, December 2020
- …but a lack of awareness is also plaguing the market
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- Figure 10: Barriers to purchase among those who are interested in taking out income protection insurance compared to all others, December 2020
- Advisors play the key role in persuading consumers
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- Figure 11: Triggers for buying income protection insurance, December 2020
- Hospitalisation benefit the most valued additional policy feature
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- Figure 12: Appealing features of an income protection policy, December 2020
Issues and Insights
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- COVID-19-related challenges will linger even as pandemic subsides
- New approaches to marketing required to reach the under-protected
The Market – Key Takeaways
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- An extended period of growth comes to an end…
- …but the market is set to recover from 2021
- 69% of new business sold via IFAs in 2020
- Government schemes helping to support demand for mortgage lending
- An expanded private rental market offers untapped opportunities
- Government pressed to offer Universal Credit disregard to renters
- Rising unemployment will dent growth prospects
Market Size and Forecast
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- An extended period of growth comes to an end due to COVID-19
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- Figure 13: Short, medium and long-term impact of COVID-19 on income protection, April 2020
- Premiums dip in 2020
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- Figure 14: New individual income protection sales and average premium, 2016-20
- The market is set to recover in 2021
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- Figure 15: Market size and forecast for sales of new individual protection policies, by value, 2015-25
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- Figure 16: Market size and forecast for sales of new individual protection policies, by value, 2015-25
- Volume sales to recover more slowly
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- Figure 17: Market size and forecast for sales of new individual protection policies, by volume, 2015-25
- Figure 18: Market size and forecast for sales of new individual protection policies, by volume, 2015-25
- New group contract business continued to grow in 2020
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- Figure 19: Volume and value of new group income protection sales, 2016-20
- Market drivers and assumptions
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- Figure 20: Key drivers affecting Mintel’s market forecast, 2015-25 (prepared on 5 April 2021)
- Learnings from the last recession
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- Figure 21: New individual income protection sales and average premium, 2008-12
- Forecast methodology
Channels to Market
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- Growth in sales through independent advice channels
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- Figure 22: Distribution of new individual (long-term) income protection contracts, by volume, 2015-20
- Figure 23: Distribution of new individual (long-term) income protection contracts, by value, 2015-20
- Bancassurance sales decline in 2020
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- Figure 24: Value of income protection (long-term) bancassurance premiums, 2015-20
Market Drivers
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- Growth in the value of loans for house purchase comes to an end in 2020
- New government support for FTBs could help boost demand for protection
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- Figure 25: Value of residential loans to owner occupiers, by type of borrower, 2016-20
- Value of remortgage lending plummets by nearly a fifth in 2020
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- Figure 26: Value of residential loans for remortgages and further advances, 2016-20
- One in five now lives in privately rented accommodation
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- Figure 27: Trends in housing tenure of adults aged 16 and over, by percentage of households living in each type of tenure, 2008/09-2018/19
- Rising unemployment will hit growth prospects
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- Figure 28: Annual unemployment rate, 2017-25 (forecast)
- Growth in self-employment has faltered
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- Figure 29: Number of self-employed workers aged 16 years and older (seasonally adjusted), Q1 2010 to Q4 2020
- Number of new claims paid rises by a fifth in 2019
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- Figure 30: Number of new claims paid vs average value of new claims paid, 2015-19
Regulatory and Legislative Changes
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- FCA provides guidance on supporting customers in financial difficulty
- Government urged to extend Universal Credit disregard to renters
- Insurers commit to the Explaining Underwriting Decisions agreement
Companies and Brands – Key Takeaways
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- Aviva retains position as market leader in 2019
- Smaller players are gaining market share
- Providers start to roll back COVID-19 changes
- Providers work to improve access to IP
- New products launched to appeal to a wider target market
Market Share
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- Aviva holds on to its position as the market leader
- Legal & General experiences solid growth
- Smaller players also perform well…
- …with those outside the top five increasing market share to 31% in 2019
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- Figure 31: Market share of the leading providers of individual income protection policies, based on volume sales, 2019
Competitive Strategies and Launch Activity
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- Providers start to move beyond COVID-19
- Holloway Friendly removes COVID-19 exclusions
- LV= reinstates shorter waiting periods
- Aviva introduces COVID-19 rehab support
- British Friendly incorporates a benefit reduction option
- Providers work to improve access to IP via simpler underwriting…
- Underwriting for MetLife’s new policy determined by five health questions
- LV= adjusts non-medical limits and eliminates additional evidence requirements
- Legal and General increases automatic underwriting limits
- British Friendly removes non-medical limits
- …and enhancements to adviser support services
- Zurich implements pre-application underwriting indicator tool
- The Exeter launches new tools that facilitate the income protection advice process
- Providers seek to broaden the appeal of IP
- Holloway Friendly targets people in lower-risk occupations
- L&G seeks to address initial affordability and the needs of small business owners
- Legal and General reaches out to renters via Tenant Shop partnership
- Anorak partners with Canopy to improve IP access to renters
- Friendly societies expand their range of free IP benefits
- The Exeter adds to range of services available on its Healthwise app
- Shepherds Friendly expands rehab support benefits
- Cirencester Friendly introduces free 24-hour remote GP service
- LV= acquisition by Bain Capital under inquiry
The Consumer – Key Takeaways
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- Some may have developed a false sense of financial security during the pandemic
- Lack of access to generous sick pay benefits makes IP relevant for many
- Consumers need to be urged to ‘stress test’ their financial resilience
- Unawareness preventing the market from expanding its reach
- A fresh approach is required to reach the under-protected
Impact of COVID-19 on Consumer Behaviour
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- Consumers’ sense of financial wellbeing has grown during the pandemic…
- …but some may have a false sense of security
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- Figure 32: The Financial Wellbeing Index, December 2019-March 2021
- Consumer confidence back near pre-COVID-19 levels in early 2021…
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- Figure 33: The Financial Confidence Index, December 2019-March 2021
- …but many will remain cautious about spending
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- Figure 34: Changes in household finances, December 2019-March 2021
Protection Product Ownership
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- One in 10 has income protection
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- Figure 35: Protection product ownership, December 2020
- Little change in penetration levels
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- Figure 36: Income protection product ownership, November 2014-December 2020
- Ownership remains skewed to the affluent and those with dependants
- Plenty of untapped potential among under-protected renters
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- Figure 37: Any protection product ownership versus any income protection ownership, by housing tenure, December 2020
- Women offer an underdeveloped market
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- Figure 38: Protection product ownership, by gender, December 2020
Resilience of Household Finances
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- 13% of households risk running out of money within a month
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- Figure 39: Resilience of household finances, December 2020
- Renters need income protection
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- Figure 40: Household financial resilience, by housing tenure, December 2020
- Households in Scotland and Northern England lack resilience
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- Figure 41: Household financial resilience, by region, December 2020
Interest in Income Protection Products
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- Interest in income protection has not improved during the pandemic
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- Figure 42: Interest in income protection products, February/December 2020
- Under-35s nearly twice as likely as average to be interested
- A lack of awareness may be holding women back
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- Figure 43: Interest in income protection products, by age and gender, December 2020
Entitlement to Sick Pay
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- Over two in five working adults on statutory sick pay
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- Figure 44: Entitlement to sick pay, December 2020
- Under-35s are least likely to be eligible for longer-term sick pay benefits
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- Figure 45: Entitlement to sick pay, by age and gender, December 2020
Barriers to Purchase
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- Cost is the main objection
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- Figure 46: Barriers to purchase for income protection, December 2020
- Awareness is a major barrier
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- Figure 47: Barriers to purchase among those who are interested in taking out income protection insurance compared to all others, December 2020
- Many who need IP most are unaware it exists
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- Figure 48: Proportion of working UK adults who have not heard of income protection, by gender, age, and housing situation, December 2020
Triggers for Buying Income Protection
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- Recommendations are key to persuading consumers
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- Figure 49: Triggers for buying income protection insurance, December 2020
Appealing Features of a Policy
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- Hospitalisation benefit is the most sought-after extra policy feature
- Features that help to preserve cover or lower premiums are also attractive
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- Figure 50: Appealing features of an income protection policy, December 2020
- Older users seek additional benefits…
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- Figure 51: Appeal of selected features of an income protection policy, by age, December 2020
- …while younger ones seek support and advice
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- Figure 52: Appeal of selected features of an income protection policy, by age, 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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- Forecast methodology
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