Table of Contents
Introduction
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- Definition
- Abbreviations
Executive Summary
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- The market
- Critical illness cover market expected to recover from recent drop
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- Figure 1: Forecast of value of critical illness cover policy sales (stand-alone and rider benefit), 2009-19
- Falling prices are restricting value of new sales
- Stand-alone critical illness cover is a tiny part of the protection industry
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- Figure 2: Proportion of sales volumes in protection industry, by product type, 2013
- Market factors
- Household finances are starting to improve but are still squeezed by inflation
- Growth in mortgage lending should mean growth in critical illness cover
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- Figure 3: Total quarterly gross secured lending, March 2009-March2014
- Companies, products and innovations
- Legal & General is the market leader
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- Figure 4: Market share of the top five providers of new individual critical illness cover, based on sales volume, 2013
- LV= has the most enhanced policy
- Additional conditions added by more providers
- Aviva educates advisers
- The consumer
- Critical illness cover is held by 11% of consumers
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- Figure 5: Protection and insurance product ownership, April 2014
- Most people have concerns about the effect of ill health on their finances
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- Figure 6: Attitudes towards sickness and income, April 2014
- The majority wouldn’t be able to cope for more than a year if unable to work due to ill health
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- Figure 7: Level of financial security – coping with an extended period of ill health, April 2014
- Nearly half of non-policyholders think critical illness cover is too expensive
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- Figure 8: Barriers to ownership of critical illness cover, April 2014
- Three quarters are unwilling to pay more than £15 per month for cover
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- Figure 9: Willingness to pay for critical illness cover, April 2014
- Interest in buying a policy next year is high
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- Figure 10: Attitudes towards critical illness cover, April 2014
- What we think
Issues and Insights
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- Smaller, more niche products could see growth
- The facts
- The implications
- Improving direct channels can open policies to a new demographic
- The facts
- The implications
- Insurers should be frank about the effects of serious illness
- The facts
- The implications
Trend Application
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- Show the value, not the cost
- Claims statistics can help overcome trust issues
- Consumers want online information
Market Drivers
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- Key points
- Household incomes remain squeezed by low wage rises
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- Figure 11: Annual change in average weekly earnings, CPI and RPI, March 2009-April 2014
- Increased mortgage lending helps insurers, but the MMR is a threat
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- Figure 12: Total quarterly gross secured lending, March 2009-March2014
- There are more first-time buyers
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- Figure 13: Volume of mortgage loans issued for house purchasing, by customer type, 2009-13
- Cancer is the biggest killer in the UK, but progress is being made
- Successful claims are on the rise
- Regulatory changes have challenged the market
Competitor Products
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- Key points
- Strong competition from other protection products
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- Figure 14: Proportion of volume of sales in protection industry, by product type, 2013
- Rider benefits are increasing in popularity
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- Figure 15: Proportion of term assurance policies with critical illness rider benefits, 2009-13
- Critical illness cover is much more popular than income protection
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- Figure 16: Volume of policy sales of critical illness rider benefit, income protection and stand-alone critical illness cover, 2014
Market SWOT Analysis
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- Figure 17: Critical illness cover market SWOT analysis, May 2014
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Who’s Innovating?
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- Key points
- Aviva highlights the benefits of cover with videos for advisers
- LV= launch enhanced payment feature
- Aviva has a new specialist high-value team
- Enhancements to critical illness cover across the market
- Growth in additional conditions
- Aviva provides more education for advisers
Market Size and Forecast
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- Key points
- Critical illness sales fell sharply in 2013
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- Figure 18: New individual critical illness sales and average annual premium, 2009-13
- Policies are almost always sold as rider benefits
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- Figure 19: New individual critical illness sales – rider benefit versus stand-alone policies, 2009-13
- Market forecast
- Volume of sales expected to grow by almost a fifth in five years
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- Figure 20: Forecast of volume of critical illness cover policy sales (stand-alone and rider benefit), 2009-19
- Figure 21: Forecast of volume of critical illness cover policy sales (stand-alone and rider benefit), 2009-19
- Falling prices to stifle growth in market value
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- Figure 22: Forecast of value of critical illness cover policy sales (stand-alone and rider benefit), 2009-19
- Figure 23: Forecast of value of critical illness cover policy sales (stand-alone and rider benefit), 2009-19
- Forecast methodology
- Fan chart explanation
Market Share
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- Key points
- Major insurers dominate the market
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- Figure 24: Market share of the top five providers of new individual critical illness cover, based on sales volume, 2011-13
- Legal & General is the market leader
Companies and Products
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- Aviva
- Description
- Critical illness product range
- Financial performance
- Recent activity
- Friends Life
- Description
- Critical illness product range
- Financial performance
- Recent activity
- Legal & General
- Description
- Critical illness product range
- Financial performance
- Recent activity
- Royal London Group
- Description
- Critical illness product range
- Financial performance
- Recent activity
- Scottish Widows
- Description
- Critical illness product range
- Financial performance
- Recent activity
- Other notable players in the market
- LV=
- PruProtect
- AIG Direct
Brand Communication and Promotion
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- Key points
- AIG is the top spending advertiser in the sector
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- Figure 25: Top-spending advertisers of critical illness cover, 2012-13
- Legal & General spent most on advertising intermediaries
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- Figure 26: Intermediary adspend on life protection products, 2012-13
- A note on adspend
Channels to Market
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- IFAs account for more than half of rider benefit premiums
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- Figure 27: Distribution of new individual critical illness cover rider benefit premiums, by channel, 2013
- Non-advised stand-alone premiums have started to grow
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- Figure 28: Distribution of new individual stand-alone critical illness cover premiums, by channel, 2011-13
Protection Product Ownership
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- Key points
- Just over one in ten have critical illness cover
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- Figure 29: Protection and insurance product ownership, April 2014
- The importance of mortgages in the sale of critical illness policies
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- Figure 30: Critical illness cover ownership, by residential status, April 2014
- Higher-earning households are more likely to have critical illness cover
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- Figure 31: Critical illness cover ownership, by gross annual household income, April 2013
- Critical illness cover appeals most to parents of dependent children
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- Figure 32: Critical illness cover ownership, by presence of own children in household, April 2014
- Life insurance is the most common other protection among critical illness policyholders
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- Figure 33: Protection and insurance product ownership, by protection and insurance product ownership, April 2014
Attitudes Towards Health and Finances
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- Key points
- Most people are concerned about the effects of ill health
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- Figure 34: Attitudes towards sickness and income, April 2014
- Employment benefits not enough for most people
- Women show more concern about the future
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- Figure 35: Attitudes towards sickness and income, by gender, April 2014
- Critical illness customers are mostly concerned with paying bills.
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- Figure 36: Selected attitudes towards sickness and income, by protection product ownership, April 2014
Level of Financial Security – Coping with an Extended Period of Ill Health
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- Key points
- Most people would struggle quickly if unable to work
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- Figure 37: How long consumers could cover bills for if unable to work due to ill health, April 2014
- Low earners are most at risk of missing bills if they are unable to work due to illness
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- Figure 38: How long consumers could cover expenses for if unable to work due to ill health, by gross annual household income, April 2014
- Critical illness policyholders are more optimistic about their finances
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- Figure 39: Ownership of protection products, by how long consumers could cover expenses for if unable to work due to ill health, April 2014
Barriers to Ownership
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- Key points
- Cost is the biggest barrier to buying critical illness cover
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- Figure 40: Barriers to ownership of critical illness cover, April 2014
- Just one in four uninsured consumers have not looked at critical illness cover
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- Figure 41: Barriers to ownership of critical illness cover, by protection product ownership, April 2014
- Those who don’t understand the product assume protection is too expensive
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- Figure 42: Barriers to ownership of critical illness cover, by all respondents vs those who do not understand the product, April 2014
- Fewer than half of unengaged consumers could pay a month’s bills if sick
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- Figure 43: How long consumers could cover bills for if unable to work, by selected barriers to ownership of critical illness cover, April 2014
Willingness to Pay for Critical Illness Cover
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- Key points
- Pricing at £16-£20 per month could nearly double the market
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- Figure 44: Willingness to pay for critical illness cover, April 2014
- The higher the income, the greater the willingness to pay for cover
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- Figure 45: Maximum price consumers would pay for critical illness cover, by gross annual household income, April 2014
- Seeing family fall ill prompts willingness to pay more for policies
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- Figure 46: Maximum price consumers would pay for critical illness cover, by selected attitudes towards critical illness cover, April 2014
- Those willing to pay more would also show the most need for cover
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- Figure 47: How long consumers could cover expenses for if unable to work, by maximum price consumers would pay for critical illness cover
Attitudes Towards Critical Illness Cover
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- Key points
- Around a fifth plan to buy critical illness cover in the next year
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- Figure 48: Attitudes towards critical illness cover, April 2014
- Online research is heavily favoured
- It is hard to engage with new customers without advisers
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- Figure 49: Percentage of people who have looked into critical illness cover previously, by protection product ownership, April 2014
- Claims statistics can build trust, and trust builds business
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- Figure 50: Percentage of people who would be more likely to purchase critical illness cover if they knew the proportion of successful claims, by selected barriers to ownership, April 2014
Appendix – Market Size and Forecast
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- Volume
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- Figure 51: Best- and worst-case forecast of the volume of critical illness policies sold (stand-alone and rider benefit) 2014-19
- Value
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- Figure 52: Best- and worst-case forecast of the value of critical illness policies sold (stand-alone and rider benefit) 2014-19
Appendix – Protection Product Ownership
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- Figure 53: Protection and insurance product ownership, by demographics, April 2014
- Figure 54: Protection and insurance product ownership (continued), by demographics, April 2014
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Appendix – Attitudes Towards Health and Finances
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- Figure 55: Attitudes towards sickness and income, by demographics, April 2014
- Figure 56: Attitudes towards sickness and income continued, by demographics, April 2014
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Appendix – Level of Financial Security – Coping with an Extended Period of Ill Health
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- Figure 57: Level of financial security – Coping with an extended period of ill health, by demographics, April 2014
- Figure 58: Level of financial security – coping with an extended period of ill health (continued), by demographics, April 2014
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Appendix – Barriers to Ownership
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- Figure 59: Barriers to critical illness cover ownership, by demographics, April 2014
- Figure 60: Barriers to critical illness cover ownership (continued), by demographics, April 2014
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Appendix – Willingness to Pay for Critical Illness Cover
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- Figure 61: Willingness to pay for critical illness cover (by amount), by demographics, April 2014
- Figure 62: Willingness to pay for critical illness cover (by amount), (continued), by demographics, April 2014
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Appendix – Attitudes Towards Critical Illness Cover
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- Figure 63: Attitudes towards critical illness cover – I am planning to buy critical illness cover within the next 12 months, by demographics, April 2014
- Figure 64: Attitudes towards critical illness cover – I would be more likely to buy critical illness cover if I knew the proportion of successful claims, by demographics, April 2014
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- Figure 65: Attitudes towards critical illness cover – I would be more interested in buying critical illness cover if I received a discount or rewards for having a healthy lifestyle, by demographics, April 2014
- Figure 66: Attitudes towards critical illness cover – I would seek advice from a finance professional before taking out critical illness cover, by demographics, April 2014
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- Figure 67: Attitudes towards critical illness cover – I have looked into critical illness cover before, by demographics, April 2014
- Figure 68: Attitudes towards critical illness cover – I don’t think critical illness cover is good value for money as it only covers certain medical conditions, by demographics, April 2014
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- Figure 69: Attitudes towards critical illness cover – I would probably purchase critical illness cover if I took out a significant financial commitment such as a mortgage in the future, by demographics, April 2014
- Figure 70: Attitudes towards critical illness cover – I would look online for information about critical illness cover if I was looking to buy it, by demographics, April 2014
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