Table of Contents
Introduction
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- Abbreviations
- Definitions
Executive Summary
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- The market
- Value of critical illness premiums expected to grow
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- Figure 1: Forecast of total new individual critical illness premiums, at current prices, 2007-17
- The invaluable role of the intermediary in CI distribution
- Market factors
- Standardisation in claims reporting could help to increase consumer confidence
- Income remains squeezed which is bad news for critical illness cover providers
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- Figure 2: Percentage change in RPI and average weekly earnings (regular pay only), January 2008-March 2013
- Cancer is the main reason for a critical illness claim
- Encouraging signs in the mortgage market should boost CI sales
- Average CI sum insured rises with average FTB advance
- Welfare reforms will pique interest in protection products
- Impact of the RDR not yet clear
- Impact of gender equalisation could result in premium increases
- Consumer Insurance Act aims to build consumer confidence
- Companies, products and innovations
- Top five providers accounted for 78% of the market in 2012
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- Figure 3: Market share of the top five providers of new individual critical illness cover, based on volume sales, 2012
- Bright Grey announced £200 million critical illness cover giveaway
- Skandia re-enters critical illness market with an RDR world-ready product
- L&G extends children’s CI cover
- LV= extends its critical illness cover
- The consumer
- Some 11% of people have critical illness cover in place
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- Figure 4: Protection product ownership, March 2013
- Financial peace of mind at a difficult time drives product ownership
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- Figure 5: Reasons for purchasing, March 2013
- Consumers want to do their own research, but still value independent advice
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- Figure 6: Purchasing considerations, March 2013
- Costly premiums are the main barrier to critical illness ownership
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- Figure 7: Reasons for not owning critical illness cover, March 2013
- Financial incentives would motivate consumers to purchase CI cover
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- Figure 8: Factors which would encourage purchase, March 2013
- Critical illness cover suffers from negative consumer attitudes
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- Figure 9: Views about critical illness cover, March 2013
- What we think
Issues in the Market
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- What can the protection industry learn from other financial markets?
- How can insurers gain consumer trust?
- Do people understand the value of CI cover?
- To what extent do people expect to rely on state support?
- How will expanding the RDR to include protection products impact the CI market?
Trend Application
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- Insurers could help consumers to improve their health
- Consumers aren’t opposed to an open dialogue about sensitive subjects
- The human touch is needed in the protection industry
Market Drivers
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- Key points
- Claims data tell a positive story but can they be trusted?
- Squeeze on income sees non-essential products fall down priority list
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- Figure 10: Percentage change in RPI and average weekly earnings (regular pay only), January 2008-March 2013
- Cancer is the main reason for a critical illness claim
- An improvement in the mortgage market is good news for CI cover
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- Figure 11: Number of loans for house purchase, by type of borrower, 2008-12
- Average sums insured tied to first-time buyer advances
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- Figure 12: Average sum insured for new critical illness cover policies versus average first-time buyer advance, 2005-12
- Welfare reforms set to shake up the protection industry
- Still early days to understand the impact of the RDR
- Impact of gender equalisation could result in premium increases
- Consumer Insurance Act aims to build consumer confidence
Competitor Products
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- Key points
- Other protection products dominate the industry
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- Figure 13: Number of individual protection policies in force, by type, 2011
- Mortgage and protection term sales include significant CI component
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- Figure 14: Critical illness rider benefits as a proportion of new individual term assurance business, 2008-12
SWOT Analysis
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- Figure 15: SWOT analysis for the critical illness market, 2013
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Who’s Innovating?
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- Key points
- Bright Grey announced £200 million critical illness cover giveaway
- Skandia re-enters critical illness market with an RDR world-ready product
- L&G extends children’s CI cover
- LV= extends its critical illness cover
Market Size and Forecast
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- Key points
- Growth in critical illness cover sales slows
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- Figure 16: New individual critical illness sales and average annual premium, 2008-12
- Most critical illness cover policies are sold as rider benefits
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- Figure 17: New individual critical illness sales – rider benefit versus standalone policies, 2008-12
- Overall drop in volume and value of in-force standalone CI business
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- Figure 18: In-force standalone critical illness policies, by volume and value, 2007-11
- Group critical illness cover is a comparatively small market
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- Figure 19: Volume and value of new group critical illness sales, 2008-12
- Improving economy will support premium growth
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- Figure 20: Forecast of total new individual critical illness premiums, at current prices, 2007-17
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- Figure 21: Forecast of total new individual critical illness premiums, at current prices, 2007-17
- More affordable policies will boost sales
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- Figure 22: Forecast of total new individual critical illness policies, at current prices, 2007-17
- Figure 23: Forecast of total new individual critical illness policies, at current prices, 2007-17
- Forecast methodology
Market Share
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- Key points
- Top five providers accounted for 78% of the market in 2012
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- Figure 24: Market share of the top five providers of new individual critical illness cover, based on volume sales, 2010-12
- Legal & General is the largest critical illness cover provider
Companies and Products
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- Aviva
- Legal & General
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- Figure 25: Key financial data for Legal & General (housing and protection business segment), 2011 and 2012
- Royal London Group
- Scottish Widows
- Friends Life
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- Figure 26: Key financial data for Friends Life, 2011 and 2012
- LV=
Brand Communication and Promotion
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- Key points
- Critical illness advertising receives a big cash injection…
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- Figure 27: Total advertising expenditure on protection products, by product category, 2011-13
- …but is mainly directed towards cancer cover products
- Not much is spent on critical illness cover advertising
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- Figure 28: Top four advertisers of critical illness products, 2011-13
Channels to Market
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- Key points
- Intermediaries operating in the critical illness cover market
- IFAs see their share of critical illness rider benefit distribution increase in 2012
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- Figure 29: Distribution of new individual critical illness rider benefit premiums, by channel, 2009-12
- Standalone critical illness cover distribution is also dominated by IFAs
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- Figure 30: Distribution of new individual standalone CI premiums, by channel, 2009-12
Protection Product Ownership
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- Key points
- Just over one in ten have critical illness cover…
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- Figure 31: Protection product ownership, March 2013
- …but only a third of people aren’t concerned about their health
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- Figure 32: Concerns around inability to work due to health reasons, March 2013
- Critical illness cover ownership higher with big earners
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- Figure 33: Protection product ownership, by gross annual household income, March 2013
- Mortgage holders are more likely to have critical illness cover
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- Figure 34: Protection product ownership, by housing situation, March 2013
Critical Illness Cover Purchase Triggers
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- Key points
- Financial peace of mind is the main driver for critical illness purchase
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- Figure 35: Reasons for purchasing, March 2013
Critical Illness Cover Purchasing Behaviour
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- Key points
- Consumers want comparison sites, research and advice when buying CI
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- Figure 36: Purchasing considerations, March 2013
Barriers to Critical Illness Cover Ownership
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- Key points
- Expensive and untrustworthy – the consumer view of critical illness cover
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- Figure 37: Reasons for not owning critical illness cover, March 2013
- 45-54-year-olds are most distrustful of insurers
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- Figure 38: Most popular reasons for not owning critical illness cover, by age, March 2013
- Distrustful consumers look for the cheapest deal
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- Figure 39: Purchasing conditions, by most popular reasons for not owning critical illness cover, March 2013
Increasing the Appeal of Critical Illness Cover
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- Key points
- Cash incentives, not claims rates will get people interested in critical illness
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- Figure 40: Factors which would encourage purchase, March 2013
- Reassurance about the level of protection could be bolstered by independent research
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- Figure 41: Purchasing conditions, by most popular factors which would encourage purchase, March 2013
- Distrustful consumers want to understand more about claims rates
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- Figure 42: Factors which would encourage purchase, by most popular reasons for not owning critical illness cover, March 2013
Attitudes Towards Critical Illness Cover
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- Key points
- Negative consumer perceptions of critical illness are damaging
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- Figure 43: Views about critical illness cover, March 2013
- Understanding negative views is the way to overcome them
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- Figure 44: Views about critical illness cover, by most popular reasons for not owning critical illness cover, March 2013
- CI cover expense can be mitigated by offering financial incentives
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- Figure 45: Views about critical illness cover, by most popular factors which would encourage purchase, March 2013
Appendix – Market Size
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- Figure 46: Forecast of total new individual critical illness premiums, at current prices, 2012-17
- Figure 47: Forecast of total new individual critical illness policies, at current prices, 2012-17
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Appendix – Protection Product Ownership
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- Figure 48: Most popular protection product ownership, by demographics, March 2013
- Figure 49: Next most popular protection product ownership, by demographics, March 2013
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- Figure 50: Level of savings and investments, by demographics, March 2013
- Figure 51: Next most popular savings levels, by demographics, March 2013
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Appendix – Critical Illness Cover Purchasing Behaviour
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- Figure 52: Purchasing considerations, by demographics, March 2013
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Appendix – Barriers to Critical Illness Cover Ownership
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- Figure 53: Most popular reasons for not owning critical illness cover, by demographics, March 2013
- Figure 54: Next most popular reasons for not owning critical illness cover, by demographics, March 2013
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Appendix – Increasing the Appeal of Critical Illness Cover
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- Figure 55: Most popular factors which would encourage purchase, by demographics, March 2013
- Figure 56: Next most popular factors which would encourage purchase, by demographics, March 2013
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Appendix – Attitudes Towards Critical Illness Cover
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- Figure 57: Views about critical illness cover, by demographics, March 2013
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