Term assurance sales fell in 2013 as a result of increased regulation, despite improvements in the mortgage market and greater consumer confidence. Both the value and volume of mortgage term assurance sales decreased as intermediaries faced regulatory changes stemming from the Retail Distribution Review and the Mortgage Market Review. Mortgage advisers also faced a sharp upturn in mortgage application business, which gave them less scope to concentrate on protection sales. Protection term assurance sales volumes were broadly flat in 2013, but strong competition in the market meant that the value of new premiums decreased. Term assurance providers will hope that intermediaries will shift their focus back to cross-selling protection products once they have adapted to the new regulations and as mortgage transactions continue to increase.

This report examines the term assurance market, analysing some of the key developments in the sector, including wider economic trends and regulatory challenges. The report also provides an overview of term assurance sales values and volumes, including a market forecast which shows expected growth in the value of the term assurance market over the next five years. Mintel’s exclusive consumer research concludes the report, looking at product ownership, the ways that consumers arrange life insurance, triggers for arranging life insurance and general attitudes towards life cover.

Term assurance is a common type of life insurance policy, providing cover for a limited and defined period that will only pay out if the policyholder dies within that term or, in the case of some policies, is diagnosed with a terminal illness. This contrasts with whole-of-life assurance, which is designed to cover an individual during their entire life and is thus guaranteed to always pay out. Note: this report is predominantly focused on the term assurance market, although comparisons are made to other related sectors.

Term assurance policies can be written on a single life, joint life (first or second death) or on a life of another basis. They are primarily used to cover the financial responsibilities of the insured and/or their beneficiaries, the most common of which is a mortgage. Indeed, many people take out term assurance when they buy their first home, linking the term of the policy with the term of the loan (typically 25-30 years). Hence, the market comprises two distinct product segments: mortgage term assurance and non-mortgage related or protection term assurance.

Premiums are based primarily on the age and health of the life assured, the sum assured and the policy term. The older the life assured or the longer the policy term, the higher the premium will generally be. Level-term assurance policies (where the sum assured remains the same over the duration of the policy term) also tend to be more expensive than decreasing term assurance (where the sum assured decreases over the term, thereby reducing the cash payout the longer the term runs). Decreasing term assurance is often taken out by repayment mortgage holders to cover their outstanding mortgage balance should they die during the mortgage term.

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