Table of Contents
Issues in the Market
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- Key issues
- Key issues
- Definition
- Broad types
- Investment or protection
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- Figure 1: The categorisation of life protection policies, 2009
- Abbreviations
Future Opportunities
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- Life coaching and financial management
- ‘Re-intermediation’ to champion consumers and cure financial illiteracy
- Social networking
Market in Brief
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- The recession and the credit crunch take their toll…
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- Figure 2: Premiums of all types of life policy, 2006-09
- … but IFAs cope better than other intermediaries
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- Figure 3: All life policy gross premiums, by distribution channel, 2006-09
- IFA confidence is looking up
- Intermediaries also face long-term problems…
- … and are looking for simplification and streamlining
- The growing costs of operating in the intermediary market
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- Figure 4: Total number of directly authoriised retail intermediary firms, Jan 2006-Jun 2009
- Figure 5: The Top protection financial advisers in the UK, based on protection turnover, 2007/08
- Will the RDR radically change the protection market?
Internal Market Environment
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- Key points
- The life assurance protection gap remains £2.3 trillion
- Many are apathetic and financially illiterate…
- … leading them to overestimate the cost of cover
- A need to rebuild trust...
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- Figure 6: Agreement with trust statements about financial advisers, December 2008
- … and show value for money
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- Figure 7: Consumer happiness with financial advisers’ fees, December 2008
- Implications
- The industry responds to boost engagement, raise trust and...
- … improve operationally
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- Figure 8: Financial services firms complained about, by sector, 2006/07-2008/09
- IFAs under pressure from rising regulatory costs…
- … and indemnity insurance costs compound the problem
- Growing role of technology
- Leading to more e-contacts
- Tele-underwriting helps the IFA and the consumer
- ABI and IFAs at loggerheads over acceptance data tables
- From life protection to life planning
- Implications
- IHT changes will hit sales of unit-linked whole-of-life policies
- Life insurance premiums get cheaper in the recession…
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- Figure 9: Annual rate of growth in the life insurance and all consumer spending price deflators, 2000 Q1-2009 Q1
- … but could rates be pushed up by Solvency II legislation?
- Genetic testing moratorium has been extended to 2014
- Supermarkets a growing threat to IFAs
Broader Market Environment
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- Key points
- The crunch increases the need for risk management
- The crunch will hit new business…
- …as will the housing slump
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- Figure 10: Residential housing transactions, 2005-09
- With-profits under pressure
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- Figure 11: Net investments, by insurance company long-term funds, Q1 2004-Q1 2009
- Improving longevity good news for the life industry
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- Figure 12: Cohort expected age of death+ at age 50, 60 and 70, 1981-2051
- Population trends will impact on demand for life policies
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- Figure 13: UK population, by age bracket, 2006-31
- Implications
Regulatory Developments
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- Key points
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- Figure 14: Summary of the structure of regulation on the life protection industry, 2009
- Split regulation
- Over-50s plans benefits
- Price disclosure for pure protection contracts
- RDR to put a spanner in the works?
- Advice split into four
- From commission to the adviser charge
- Raising professional standards
- What impact will RDR have on life protection?
- Implications
- Will “read across” result?
- IFAs in the dark
- Mixed Commission on the rise
- New capital adequacy requirements
- Treating Customers Fairly initiative
- Industry reaction to TCF
- Thorensen Review – Money Guidance Service
- Impact on market for financial advice
Consumer Competitive Context
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- Key points
- Intermediaries take second place to friends and family…
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- Figure 15: Sources of financial advice used, January 2009
- … but IFAs appeal to the affluent
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- Figure 16: The main sources of financial advice used, by socio-economic group and household income, January 2009
Strengths and Weaknesses in the Market
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- Figure 17: Life protection products – strengths and weaknesses in the market, 2009
- Strengths
- Weaknesses
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Who’s Innovating?
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- Key points
- Aviva looks at postcode pricing for life insurance….
- … and offers free life cover to new parents
- IFA Life starts matchmaking…
- L&G “revolutionises” client management…
- … and tries to help advisers convert more leads into sales
- L&G drops doctors medical report for under-50s
- Zurich simplifies the process
- LifeSearch one-stop policy
- Aviva’s Future Adviser Programme
- Friends Provident Selling Techniques Toolkit
- Instant acceptance life and critical illness cover
Trade Perspective
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- Intermediaries must build trust and awareness…
- And plan for RDR and get qualified
- Impact of RDR depends on read over…
- … though some see fewer, but more professional intermediaries…
- … with IFAs needing help from the life providers
- Better prospects for intermediaries in the future…
- … but don’t expect significant new business volumes
- More product development
- Professionalism and added value the key
Intermediary Marketplace
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- Key points
- Current structure of the advice market
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- Figure 18: Overview of the structure of UK intermediary market, 2009
- Figure 19: The structure of the UK intermediary market, June 2009
- Fewer intermediaries
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- Figure 20: Total number of directly authoriised retail intermediary firms, June 2006-July 2009
- Financial advisers come through the recession well
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- Figure 21: Number of directly authorised retail intermediary firms, by sector (primary category), 2006-09
- Strong trend towards ARs and non-specialisation
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- Figure 22: The growth in the number of intermediaries, by type, July 2006-June 2009
- The next five years will be difficult…
- … but not all agree
Distribution Overview
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- Key points
- Three main types of intermediary
- Intermediaries generate the lion’s share of single life, regular premium business…
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- Figure 23: New individual regular premium business, by distribution channel, 2006-09
- … but are less important when looking at the overall life market
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- Figure 24: All life policy premiums, by distribution channel, 2006-09
- WOM especially important for whole life linked and term non-linked policies
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- Figure 25: New individual, regular premium business, by type of policy and distribution channel, 2008
- IFAs dominate group life but struggle for single premium and collective life business
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- Figure 26: New collective life and single premium business, by type of policy and distribution channel, 2008
- Life offices look to generate more business on a non-advised basis
Market Size and Trends
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- Key points
- The whole market declines
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- Figure 27: Premiums of all types of life policy+, 2006-09
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- Figure 28: Gross premiums of all types of life policy, by type of policy, 2006-09
- Single life, regular premium protection sales decline
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- Figure 29: Premiums and policy sales of new single life, regular premium life policies, 2002-09
- Term insurance dominates the individual, regular premium sector...
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- Figure 30: Premiums of new single life, regular premium life policies, by type of policy, 2005-09
- But whole-of-life is the star performer led by over 50 policies
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- Figure 31: New policy sales of single life, regular premium life policies, by type of policy, 2005-09
- Problems in the mortgage market hold sales down
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- Figure 32: The Value of new premium for term assurance and endownment policies, by type, 2006-09
- Figure 33: The number of new term assurance policies sold, by type, 2006-09
- Forecast
- Term premiums to remain subdued
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- Figure 34: Life insurance premium income, 2005-14
- Factors used in the forecast
Intermediary Performance
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- Key points
- IFAs generate over £500 million of life sales…
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- Figure 35: IFA-generated new life assurance premiuims, 2006-09
- Group life and term sales are the bedrock of the IFA market
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- Figure 36: Breakdown of IFA-generated life premiums, by type, 2006-09
- It’s a rocky ride for the single and multi-tie intermediary
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- Figure 37: Singe and multi-tie-generated new life assurance premiuims, 2006-09
- Regular, individual term policies now the main business for a tied agent
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- Figure 38: The breakdown of life premiums generated by single tie/multi-tie agents, 2006-09
- Direct, non-intermediated sales face the same rollercoaster as tied agents
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- Figure 39: Non-intermediated-generated new life assurance premiuims, 2006-09
- Regular premium individual whole life policies set to become the most important for the direct channels
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- Figure 40: The breakdown of life premiums generated, by non-intermediated channels, 2006-09
- Bancassurance sales pulled down by loss of collective life business
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- Figure 41: Bancassurance-generated new life assurance premiuims, 2006-09
- Guaranteed-acceptance plans of growing importance
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- Figure 42: The breakdown of life premiums generated by bancassurance channels, 2006-09
Key Players
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- Key points
- Sesame and Openwork are the largest protection IFA firms by turnover
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- Figure 43: The Top protection financial advisers in the UK, based on relevant turnover, 2007/08
- About the top players
- Sesame
- Openwork
- Intrinsic Financial Services
- The Tenet Group
- Personal Touch Financial Services
- The Money Portal
Brand Communication and Promotion
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- Key points
- Life protection intermediaries spend little on advertising
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- Figure 44: Advertising expenditure, by financial intermediaries that do or may sell life protection, by sector, 2006-08
- Press advertising the most important
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- Figure 45: Proportional distribution of life protection intermediary advertising expenditure, by media type, 2008
- But intermediaries also benefit from insurer advertising
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- Figure 46: Advertising expenditure on life protection of direct benefit to advisers/intermediaries, 2006-08
- Lead generation of prime importance
The IFA: Client Sales
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- Key points
- It’s the economy, stupid!
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- Figure 47: The main barriers when it comes to trying to sell protection and life insurance products to clients, July 2009
- Implications and opportunities
- But lack of trust and financial illiteracy are important long-term problems…
- Implications and opportunities
- … along with insurers’ direct sale activities
- Implications and opportunities
The IFA: Provider Support
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- Key points
- Simplification rather than complexity needed from providers
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- Figure 48: What insurers could do to make it easier for IFAs to sell protection products and life insurance to their clients, July 2009
- IFAs get their wish for awareness marketing
- Get proactive to keep the IFA informed
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- Figure 49: How IFAs prefer to keep up to date with developments in the life and protection markets, July 2009
The IFA: Future Intentions
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- Key points
- If things are not exactly rosy at the moment...
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- Figure 50: How confident are IFAs in the future, compared to six months ago, July 2009
- “Things can only get better”
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- Figure 51: How confident IFAs are in the future of the financial services industry, January 2009, July 2009 compared to six months ago, July 2009
- And for sure, things are not looking any worse
- More IFAs are planning expansion rather than contraction
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- Figure 52: IFA future plans over the next 12 months, January 2009 and July 2009
- But more are also planning to leave the industry
- Will RDR force a shift towards fees?
- Looking after the current client base
The IFA: Opinions on Legislation
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- Key points
- Almost 40% have a negative view of the Retail Distribution Review
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- Figure 53: Opinions on the impact of the RDR, TCF and Thorensen Review on IFA business, July 2009
- But opinion is shifting towards the green
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- Figure 54: Opinions on the impact of the RDR, January 2009 and July 2009
- TCF seen as largely benign
- Most IFAs don’t get the point of the Thorensen Review
Appendix – Intermediary Marketplace
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- Figure 55: The number of general insurance intermediary firms, by type, July 2006-June 2009
- Figure 56: The number of financial advice intermediary firms, by type, July 2006-June 2009
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- Figure 57: The number of mortgage intermediary firms, by type, July 2006-June 2009
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Appendix – Market Size and Trends
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- Figure 58: The whole-of-life assurance market, 2006-09
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Appendix – Segmentation
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- Figure 59: New life premiums generated, by IFAs/WoM, 2006-09
- Figure 60: New life premiums generated, by single and multi-tie agents, 2006-09
- Figure 61: New life premiums generated, by direct, non-intermediated channels, 2006-09
- Figure 62: New life premiums generated, by bancassurance channels, 2006-09
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