Table of Contents
Introduction and Abbreviations
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- Consumer perception of long-term risk inhibits IP market growth
- Report contents
- Global information and research
- Consumer research
- ACORN
- Abbreviations
Premier Insight
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- Whole-family products will increase the appeal of IP
- Meld IP with ASU
- Draw on the facts to increase consumer knowledge
- Establish industry standards for IP
- Consumer view of the NHS and other medical insurances spoils understanding of the IP proposition
Executive Summary
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- New IP sales are on a downward trend
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- Figure 1: New individual sales of IP, 1998-2005
- IP benefits paid have risen by 64% since 2000
- Established players continue to lead the market
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- Figure 2: Provider share (rounded figures), new individual IP business, 2004
- Certain consumers have the funds to invest in IP
- Consumer propensity to claim incapacity benefit increases with age
- The FTB market provided relatively few IP sales opportunities in 2005
- IFAs are the largest distributors
- The market is changing
- Eight in ten IP holders have never had an extended illness
- Market outlook
- Industry viewpoints
- Excerpt 1
- Excerpt 2
Product Background
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- Standard policy considerations
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- Figure 3: Income protection, policy application matters and claim considerations, January 2006
- The majority of providers appear to offer the lower maximum benefit of income
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- Figure 4: Selected IP providers, by percentage of benefit income and number of policy exclusions, January 2006
- Occupational matters
- Income protection in the long-term framework
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- Figure 5: Long-term insurance business, total premiums, 2004
- Average annual household expenditure on IP was £485
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- Figure 6: Households purchasing insurance, average annual expenditure on insurances, 2004
- Clearer benefit details might boost sales
- In 2004 the average annual benefit for IP reached almost £10,000
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- Figure 7: Average annual benefits for new individual income protection policies, 1998-2004
- State benefit amendments kick-start interest in IP
Market Factors
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- Incite positive emotion towards purchasing
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- Figure 8: Composition of households, 2002
- The number in employment is likely to remain steady
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- Figure 9: Total workforce and proportion of workforce unemployed, 2000-09
- The number of beneficiaries is on a declining trend
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- Figure 10: Incapacity benefit and severe disablement allowance, total claimants and beneficiaries, 1996-2004
- The number of short-term claimants has declined by 8% between 2000 and 2004
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- Figure 11: Incapacity benefit claimants, by rate of benefit, Q2 figures, 2000-04
- Propensity to claim IB increases with age
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- Figure 12: Number of incapacity benefit claimants, by gender, age and region, 2004
- Complaints against IP rose in 2005
- Median weekly earnings rose 17.8% between 2000 and 2004
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- Figure 13: Median weekly earnings and incapacity benefit as a percentage of earnings, 2000-04
- The percentage of new FTB loans for house purchase shows a decline
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- Figure 14: New loans for house purchase, 2000-04
- The growth rate of IP benefits paid is relatively high
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- Figure 15: Index of IP benefits paid, 2000-04
Market Size
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- New sales for IP and CIC are on a downward trend
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- Figure 16: Actual new individual sales of IP versus CIC, 1998-2004
- CIC sales continue to decline in 2004
- New individual IP premiums peaked at just over £79 million in 2002
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- Figure 17: New sales of individual IP, by volume and value, 2000-05
- The number of lives covered by individual IP rose rapidly in 2004 compared with 2003
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- Figure 18: Number of lives covered and regular premiums collected, 2000-05
- Group IP premium income rose by 24.3% between 2000 and 2005
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- Figure 19: Group IP, number of lives and premiums collected (on business in force), 2000-05
Key Players
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- Consolidation has changed the IP industry
- The traditional players are the market leaders
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- Figure 20: Market share based on new individual IP business, 2004
- The top tier of providers accounted for two thirds of business
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- Figure 21: Key IP players, by number of policy sales, 2003-04
- Company profiles
- Friends Provident
- HSBC
- Abbey (Scottish Provident)
- Norwich Union
- Legal & General
- Further industry news
Distribution
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- Internet sales continue to be limited, but e-business might underpin market growth
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- Figure 22: IP distribution channels, January 2006
- IFA sales growing in importance
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- Figure 23: Proportion of new individual IP policy sales, by distribution channel, 2000-05
- Consumer access to a good IFA is crucial
- Opportunities exist for connected IFAs
- Friends Provident signs distribution agreement with Barclays
Advertising and Promotion
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- Nowadays PPI seems more popular than IP
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- Figure 24: IP advertising expenditure versus CIC and PPI, 2004
- Work around larger emotional issues to increase the appeal of IP
- Direct mail accounts for almost all IP advertising
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- Figure 25: IP advertising expenditure, by advertising outlet, 2004
- Advertising expenditure
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- Figure 26: Indicative advertising expenditure on IP, by provider, by channel, 2004
Consumer Financial Activity
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- Relationship with the main financial services providers
- Consumer uncertainty will impact levels of borrowing
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- Figure 27: Savings, investment, borrowing and debt repayment – consumers’ expected activity, June 2004-September 2005
- Younger and less affluent consumers will be relatively more active
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- Figure 28: Expected financial activity, by socio-demographic and income groups, September 2005 and average for the last 15 quarters
- Debt repayment remains high on the agenda
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- Figure 29: Leading financial activities planned in the next six months, September 2004-September 2005
- Real promise in the property market
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- Figure 30: Intended mortgage and property purchase activity, September 2003-September 2005
- Little change year on year in MFSP share
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- Figure 31: Leading main financial services providers: market shares, September 2004-September 2005
- RBS should benefit from increased life and pensions business
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- Figure 32: Saving, investment and lending market sizes, by expected customer demand and brand leaders (overall % intending to undertake activity in brackets), September 2005
- The Scottish banks will have the most active customer base
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- Figure 33: Activity levels of main financial providers’ customer bases, September 2005
- HSBC and RBS can expect deposits to be built up
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- Figure 34: Activity intentions and current household financial situation, by MFSP, September 2005
Consumer Insight
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- Childhood disease and long-term illness are constant family issues
- The penetration of IP stood at 7% in November 2005
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- Figure 35: Penetration of protection products, November 2005
- Life commitments intensify for the middle-aged
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- Figure 36: Ownership of protection products, by gender, age, socio-economic group and marital status, November 2005
- Implications
- The issue of family security drives sales
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- Figure 37: Ownership of protection products, by lifestage, working status, gross annual household income and ACORN category, November 2005
- Implications
- Consumers are increasingly using the Internet to research financial products
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- Figure 38: Ownership of protection products, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, November 2005
- Implications
- One in ten consumers have had a longer-term illness or disablement
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- Figure 39: Frequency of illness or disablement, November 2005
- The occurrence of illness or disablement increases with age
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- Figure 40: Frequency of illness or disablement, by gender, age, socio-economic group and marital status, November 2005
- Implications
- There are regional variations in the occurrence of extended illness
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- Figure 41: Frequency of illness or disablement, by lifestage, working status, TV region and tenure, November 2005
- Implications
- Commercial television advertising may be used to promote IP
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- Figure 42: Frequency of illness or disablement, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, November 2005
- Implications
- One in ten IP policyholders have had an extended period off work
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- Figure 43: Frequency of illness, by IP ownership, November 2005
Consumer Attitudes and Targeting Opportunities
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- 11% of consumers refer to cost as a barrier to purchasing IP
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- Figure 44: Sentiment towards IP, November 2005
- Better targeting of existing customers
- A depression in the FTB market has hampered development
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- Figure 45: Sentiment towards IP, by gender, age, socio-economic group and lifetstage, November 2005
- Implications and opportunities
- Increasing premiums deter ageing consumers
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- Figure 46: Sentiment towards IP, by age/socio-economic group, working status, TV region and tenure, November 2005
- Implications and opportunities
- Waitrose customers were most likely to say that IP is too expensive
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- Figure 47: Sentiment towards IP, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, November 2005
- Implications and opportunities
- Nearly a tenth of consumers said that other insurances cancel out the need for IP
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- Figure 48: Attitudinal statements, by occurence of disablement, November 2005
- Certain younger individuals are good targets for IP insurers
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- Figure 49: Attitude towards financial commitment, by gender, age, age/socio-economic group and gross annual household income, November 2005
- Implications and opportunities
- Take IP to the Internet
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- Figure 50: Attitude towards financial commitment, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, November 2005
- Implications and opportunities
- Merge IP with ASU
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- Figure 51: Level of agreement with IP/ASU statement, by gender, age, socio-economic group, marital status and lifestage, November 2005
- Implications and opportunities
- Test the market for a merged product
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- Figure 52: Level of agreement with IP/ASU statement, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, November 2005
- Implications and opportunities
- Considerate individuals might be encouraged to purchase IP
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- Figure 53: Level of agreement with statement, by gender, age, socio-economic group, marital status and lifestage, November 2005
- Implications and opportunities
- London appears to be a decent target region for IP insurers
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- Figure 54: Level of agreement with statement, by age/socio-economic group, working status, TV region and ACORN category, November 2005
- Implications and opportunities
- Popular tabloid readers are found to be reasonable targets
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- Figure 55: Level of agreement with statement, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, November 2005
- Implications and opportunities
- A significant proportion of those who favour the product do not know how to source it
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- Figure 56: Positive attitudinal responses, by willingness to consider buying income protection, November 2005
- Key consumer targets
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- Figure 57: Key consumer typologies for IP, November 2005
- Not Needed
- Abstainers
- Unconvinced
- Limited Funds
- Unacquainted
- Certain individuals view IP as less important compared with other insurances
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- Figure 58: IP typologies, by gender, age, socio-economic group and marital status, November 2005
- Preference for instant gratification is an issue
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- Figure 59: IP typologies, by lifestage, working status, presence of children and TV region, November 2005
- There are a number of opportunities to reach new customers
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- Figure 60: IP typologies, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, November 2005
- Broadsheet readers appear sceptical
- Further targeting opportunities
- CHAID analysis indicates decent targets for IP insurers
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- Figure 61: Main target groups, by attitudinal statements, November 2005
Industry Views
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- The regulation of protection will favour IP
- Increasing public awareness of IP benefits would be a good start
Future Development
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- The uniqueness of the IP proposition will emerge
- Providers will operate using industry-standard conditions
- A market for IP Internet-based sales will be established
- Total family cover will become standard
Market Forecast
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- A forward-looking market
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- Figure 62: Forecast of individual regular-premium income, at current and 2005 prices, 2005-10
- New product development
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- Figure 63: Forecast of group regular-premium income, at current and 2005 prices, 2005-10
- Factors used in this forecast
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