Table of Contents
Issues in the Market
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- Main findings of the research
- Abbreviations
Future Opportunities
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- Trading up, trading down, trading over – Winning in the slowdown
- The rise of behavioural economics
- The industry must act to raise awareness
- Don’t JUST focus on the low level of state benefits
- Providers should look beyond traditional market segments
- Restoring consumer confidence remains a key priority
Market in Brief
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- Economic uncertainty provides opportunities for income protection
- New income protection sales staged a recovery during 2008
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- Figure 1: New individual income protection sales (by volume and value), 2002-08
- Friends Provident remains the leading income protection provider
- Trade perspective: The industry faces a number of challenges
- The pace of innovation is increasing
- Mintel’s research findings: Product ownership
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- Figure 2: Ownership of protection and health insurance products, November 2008
- Mintel’s research findings: Attitudes towards protection products
- Mintel’s research findings: The need for income protection
Internal Market Environment
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- Key points
- The income protection gap has risen to £190 billion
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- Figure 3: Income protection gap, measured by annual benefit, 2002-07
- A lack of awareness continues to plague the industry
- The Income Protection Task Force is trying to raise awareness
- Other initiatives may help by boosting financial capability
- Thoresen Review of Generic Financial Advice
- RDR
- There are also calls for a generic protection advertising campaign
- Consumer mistrust is also believed to be constraining sales
- Non-disclosure rules and the TCF initiative could help restore faith
- Publishing claims data is another option for restoring trust
Broader Market Environment
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- Key points
- Economic uncertainty could boost income protection sales
- Mortgage lending has collapsed in the last 12 months
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- Figure 4: Number of approvals secured on dwellings, seasonally adjusted, January 2006-November 2008
- But the mortgage market malaise may have a ‘silver lining’
- Population trends will impact on demand for income protection
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- Figure 5: UK population, by age bracket, 1992-2013
- Further growth in the self-employed ranks could boost sales
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- Figure 6: Total workforce and employment figures, 1992-2013
- Changing household composition will also affect future demand
- Welfare reforms should be positive for income protection
Competitive Context
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- Key points
- Income protection fits within the suite of protection products
- ‘Rival’ products have largely eclipsed income protection
- Adviser preference for ‘rivals’ has disadvantaged income protection
- The weak mortgage market has inevitably hit new MPPI sales
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- Figure 7: Gross new mortgage advances and new MPPI policies, H1 2003-H1 2008
- Critical illness sales have also declined in recent years
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- Figure 8: New sales of individual critical illness cover, 2002-07
Strengths and Weaknesses in the Market
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- Figure 9: Strengths and weaknesses of the income protection market, January 2009
- Strengths
- Protection gap provides significant scope to increase the market
- Income protection is the cornerstone of protection needs
- Recent innovations in product development
- The downturn in the housing market could generate interest among advisers
- Weaknesses
- Lack of awareness among consumers and financial intermediaries
- Perceived product complexities
- Adviser preference for ‘rival’ products
- Lack of consumer trust in the protection industry
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Who’s Innovating?
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- Key points
- The pace of innovation within the protection market has increased
- Pioneer has been at the forefront of this drive for innovation
- Income Protection Solutions is a new offering from Norwich Union
- LV= has launched a Mortgage & Lifestyle Protection plan
- Fortis has entered the market with an innovative product range
- Friends Provident have added income protection to eSelect
- Providers are also offering more assistance to advisers
- Rehabilitation is also currently a key development area
- Future innovation themes: simplification, underwriting and rehabilitation
Trade Perspective
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- The income protection industry faces a number of challenges…
- … but the ‘Cinderella’ product may be set to go to the ‘Ball’
- Innovation will focus on simplification, underwriting and rehabilitation
- Providing quality, impartial advice is the key to distribution
- Providers need to focus on ways to improve the application experience
Market Size and Forecast
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- Key points
- New income protection sales staged a recovery during 2008
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- Figure 10: New individual income protection sales (by volume and value) and average annual premiums, 2002-08
- Average annual benefits continue to rise
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- Figure 11: Average annual benefits for individual income protection policies, 2002-07
- Recent sales growth should boost the number of policies in-force
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- Figure 12: Total number of individual income protection policies in-force, regular-premium income, and maximum benefits insured per annum, 2002-07
- Around 1.8 million people are covered by a group policy
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- Figure 13: Group income protection schemes, 2002-07
- Forecast – An end to the downward trend?
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- Figure 14: Forecast of new individual income protection sales (by volume and value) and average annual premiums, 2002-13
- Factors used in the forecast
Market Share
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- Key points
- Large insurers dominate the income protection market
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- Figure 15: Top five providers of new individual income protection policies, by volume of sales, 2007
- Friends Provident remains the leading income protection provider
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- Figure 16: New individual income protection policy sales, by product provider, 2006-07
- Smaller players have gained market share in recent years
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- Figure 17: New individual income protection policy sales, top five providers versus all other providers, 2004-07
Companies and Products
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- Key points
- Key market developments
- Company snapshots
- Friends Provident
- Norwich Union
Brand Communication and Promotion
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- Key points
- Income protection providers invest fairly modest sums on advertising
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- Figure 18: Advertising expenditure on income protection products, 2003/04-2007/08
- A majority of last year’s advertising was via the press
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- Figure 19: Advertising expenditure on income protection products, by media type, 2006/07-2007/08
- ASU providers top the advertising expenditure table
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- Figure 20: Advertising expenditure on income protection products, by organisation, 2006/07-2007/08
Channels to Market
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- Key points
- Income protection products are ‘sold’ not ‘bought’
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- Figure 21: Proportion of advised/non-advised sales of protection products, April 2007-March 2008
- IFAs account for more than half of new income protection sales
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- Figure 22: New individual sales of income protection policies, by distribution channel, 2006-07
- Direct channels account for a tiny proportion of new sales
- Banks and building societies account for three out of ten sales
The Consumer – Product Ownership
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- Key points
- Survey background
- One in 12 consumers hold an income protection policy
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- Figure 23: Ownership of protection and health products, November 2008
- Protection policyholders are more likely to buy other protection products
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- Figure 24: Ownership of protection and health products, by protection product ownership groups, November 2008
- More than one in seven 35-44-year-olds hold income protection
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- Figure 25: Ownership of selected protection products, by gender, age and socio-economic group, November 2008
- Family commitments encourage people to protect their income
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- Figure 26: Ownership of selected protection products, by marital status, lifestage, ACORN group and TV region, November 2008
- Mortgage holders form a key segment for protection providers
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- Figure 27: Ownership of selected protection products, by working status, income, household tenure, technology users and newspaper readership, November 2008
- ABC1s, men and 35-44s dominate the income protection profile
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- Figure 28: Profile of all protection policyholders and income protection policyholders, November 2008
The Consumer – Attitudes towards Protection Products
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- Key points
- Almost three in ten people feel insurance provides peace of mind
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- Figure 29: Agreement with statements about protection issues, November 2008
- But a lack of trust remains a barrier
- More than a quarter of ABC1 35-54s lack faith in insurers
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- Figure 30: Agreement with statements about protection issues, by gender, age and socio-economic group, November 2008
- ABC1 families are particularly positive about protection issues
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- Figure 31: Agreement with statements about protection issues, by marital status, lifestage, ACORN group and TV region, November 2008
- A third of high-income households value extra financial security
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- Figure 32: Agreement with statements about protection issues, by working status, income, household tenure, technology users and newspaper readership, November 2008
- Almost three in ten income protection holders do not trust insurers
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- Figure 33: Agreement with statements about protection issues, by protection product ownership, November 2008
The Consumer – The Need for Income Protection
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- Key points
- A minority of workers feel illness would quickly trigger financial woes
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- Figure 34: Length of time people could support themselves without falling into financial difficulties, November 2008
- Almost a fifth of C2DE 18-34s would be struggling inside a month
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- Figure 35: Length of time people could support themselves without falling into financial difficulties, by gender, age and socio-economic group, November 2008
- Seven in ten renters would face financial ruin within six months
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- Figure 36: Length of time people could support themselves without falling into financial difficulties, by marital status, lifestage, working status, income, household tenure and TV region, November 2008
- Over a third of workers would rely on savings if they fell ill
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- Figure 37: Means of support in the event of extended absence from work, November 2008
- The 45-54s are most likely to rely on state benefits
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- Figure 38: Means of support in the event of extended absence from work, by age, November 2008
- More than a fifth of ABs would sell assets if they fell ill
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- Figure 39: Means of support in the event of extended absence from work, by socio-economic group, November 2008
- Only a fifth who could cope for over a year have insurance cover
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- Figure 40: Means of support in the event of extended absence from work, by length of time people could support themselves without falling into financial difficulties, November 2008
The Consumer – Targeting Opportunities
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- Key points
- Dissecting the workforce according to income protection needs
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- Figure 41: Segmentation based upon consumers’ need for income protection, November 2008
- ‘Covered’
- ‘Savings reliant’
- ‘Backed up’
- ‘Strugglers’
- ‘Disinterested’
- There are large variations in the cluster group profiles
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- Figure 42: Segmentation based upon consumers’ need for income protection, by gender, age, socio-economic group, lifestage, income, tenure and TV region, November 2008
- Attitudes towards protection products also vary by cluster group
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- Figure 43: Agreement with statements about protection products, by typologies based upon consumers’ need for income protection, November 2008
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