Table of Contents
Executive Summary
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- The market
- Individual sector is not expected to see real growth until 2018
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- Figure 2: Forecast of new individual (long-term) income protection premiums – Fan chart, 2009-19
- Recent performance – Individual sector
- Recent performance – Group sector
- Market factors
- Low product take-up
- Competition from short-term protection products
- Demand inhibitors
- Recent and forthcoming regulation
- Company, brands and innovation
- Leading providers
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- Figure 3: Estimated market shares of the top five providers of new individual income protection, based on volume sales, 2013
- Product innovation
- Brand reinforcement
- Distribution trends
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- Figure 4: Distribution of new income protection premiums, by sector and channel, 2014
- The consumer
- Penetration of income protection and related products
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- Figure 5: Ownership of long-term and short-term protection products, by total sample, mortgage holders and those in work, November 2014
- Significant financial commitments
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- Figure 6: Current financial commitments and obligations, November 2014
- Long-term income protection gives owners peace of mind
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- Figure 7: Financial capability if unable to work for six months or more, November 2014
- 37% of non-insured consumers feel they could cover living costs from savings
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- Figure 8: Contingency financial options if unable to work for six months or more (top eight only), November 2014
- Reasons for not having insurance protection
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- Figure 9: Reasons for not having income/mortgage protection (top five only), November 2014
- Attitudes toward income protection
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- Figure 10: Extent of agreement with statements about to protection insurance, November 2014
- What we think
Issues and Insights
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- Educating mortgage borrowers will help improve the market’s fortunes
- The facts
- The implications
- Trade body promotes the idea of group income protection to reduce the sickness absence bill
- The facts
- The implications
- Welfare reform creates a fresh opportunity to remind people of the benefit of having income protection
- The facts
- The implications
Trend Application
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- Trend: Prove it
- Trend: Survival Skills
- Trend: Why Buy?
Market Drivers
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- Key points
- A growing workforce should help drive demand for income protection
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- Figure 11: Annual level and rate of employment and unemployment – UK (seasonally adjusted), 2005-14
- Number of house-purchase loans up by a quarter in 2014
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- Figure 12: Volume of house purchase loans, by type of borrower, 2006-14
- There’s a huge income protection gap in the UK
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- Figure 13: Ownership of long-term and short-term protection products, by total sample, mortgage holders and those in work, November 2014
- Welfare reform creates new opportunities for insurers
- Around a third of employees would only get Statutory Sick Pay from their employer if they were absent for more than three days due to illness
- Assessing the need for income protection
- ABI proposes further workplace reforms that centre on group income protection
- Only 9% of individual income protection claims are rejected…
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- Figure 14: Summary of protection claims paid and declined, by product type, 2013
- …with around half of these being due to not satisfying policy definitions
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- Figure 15: Proportional distribution of declined claims, by reason and product type, 2013
Regulation Round-up
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- Key points
- Recent and forthcoming regulation affecting the protection insurance industry
- Industry initiatives
Market SWOT Analysis
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- Figure 16: Income protection market – strengths, weaknesses, opportunities and threats, 2015
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Who’s Innovating?
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- Key points
- Summary of recent activity
Market Size and Forecast
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- Key points
- Over the past two years, sales of income protection have declined by nearly half
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- Figure 17: New individual (long-term) income protection sales and average premium, 2009-14
- Group premiums are three times the value of individual premiums
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- Figure 18: Volume and value of new group (long-term) income protection sales, 2009-14
- Business in force
- Long-term versus short-term income protection
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- Figure 19: Premium income related to new and in-force long-term income protection business and short-term ASU business, 2009-13
- Market forecast: Real premium growth will remain a challenge in the short term
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- Figure 20: Forecast of new individual (long-term) income protection premiums – Fan chart, 2009-19
- Figure 21: Forecast of new individual (long-term) income protection premiums, at current and constant prices, 2009-19
- Forecast methodology
- Fan chart explanation
Market Share
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- Key points
- Friends Life sold the most individual policies in 2013
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- Figure 22: Estimated market shares of the top five providers of new individual income protection, based on volume sales, 2013
- Unum is the market leader in the group sector
Companies and Products
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- Friends Life
- 2013 ranking
- 2013 claims paid
- Description
- Protection product range
- Distribution
- Recent financial performance
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- Figure 23: Key financial data for Friends Life’s UK division, full year 2012-13 and half year 2013-14
- Recent activity
- LV=
- 2013 ranking
- 2013 claims paid
- Description
- Protection product range
- Distribution
- Recent financial performance
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- Figure 24: Key financial data for LV=’s Life business, 2012-13
- Recent activity
- Legal & General
- 2013 ranking
- 2013 claims paid
- Description
- Protection product range
- Distribution
- Recent financial performance
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- Figure 25: Key financial data for Legal & General Assurance Society, full year 2012-13 and interim 3Q 2013-14
- Recent activity
Brand Communication and Promotion
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- Key points
- Limited above-the-line adspend on income protection products
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- Figure 26: Total advertising expenditure on protection products, by product category, 2010-14
- Insurers experimenting with digital channels
- Aviva uses radio to highlight the need for family protection
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- Figure 27: Top three advertisers of income protection products, 2010-12
Channels to Market
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- Key points
- The vast majority of protection business is sold with advice
- Restricted advisers grew their share of individual income protection in 2014…
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- Figure 28: Distribution of new individual (long-term) income protection premiums, by channel, 2013-14
- …but play no part in the group sector
Product Ownership
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- Key points
- Survey background
- Protection products continue to record low penetration rates
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- Figure 29: Ownership of long-term and short-term protection products, by total sample, parents, mortgage holders and those in work, November 2014
- More have short-term than long-term cover
- Significant product crossover
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- Figure 30: Ownership of protection products – Cross-analysis, November 2014
- Take-up is highest among the 25-44s, but thereafter starts to decline
Personal Financial Commitments
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- Key points
- Most people have at least one financial commitment to take care of
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- Figure 31: Current financial commitments and obligations, by total sample, parents, mortgage holders and those in work, November 2014
- Many are encumbered with multiple responsibilities
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- Figure 32: Current financial commitments and obligations, by top three commitments, November 2014
- There’s considerable scope to grow the income protection market
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- Figure 33: Current financial commitments and obligations, by ownership of protection products, November 2014
Financial Fortitude
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- Key points
- Only 17% would be able to maintain their current standard of living if they couldn’t work for six months or more
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- Figure 34: Financial capability if unable to work for six months or more, November 2014
- Those who have long-term income protection are much more confident in their predictions
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- Figure 35: Financial capability if unable to work for six months or more by ownership of short or long-term term income protection, November 2014
- 11% of the non-insured have no idea how they would fare
- Those with unsecured debts are in a particularly vulnerable position
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- Figure 36: Financial capability if unable to work for six months or more by top three financial commitments, November 2014
Non-policyholders’ Contingency Plans
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- Key points
- Most people would draw on their savings if they were unable to work for a long spell
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- Figure 37: Contingency financial options if unable to work for six months or more, by parents and mortgage holders, November 2014
- Relying on savings is unrealistic for most households
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- Figure 38: Level of personal savings, by working households and the non-insured who would rely on savings in the event of being unable to work, November 2014
Reasons for Not Having Cover
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- Key points
- Cost is the number one objection to taking out income protection
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- Figure 39: Reasons for not having income/mortgage protection, by total sample, parents and mortgage holders, November 2014
- A lack of trust is still holding back the market
Attitudes toward Protection Insurance
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- Key points
- Many people recognise there is an even greater need for insurance as a result of welfare changes
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- Figure 40: Extent of agreement with statements about to protection insurance, November 2014
- A recognition that State support will have to be reduced
- Two thirds of parents agree that it’s worth considering anything that financially protects their family
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- Figure 41: Agreement with statements about protection insurance, by total sample, parents, mortgage holders and those in work, November 2014
Appendix – Market Size and Forecast
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- Best- and worst-case scenarios
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- Figure 42: Forecast of new individual income protection premiums – Best- and worst-case scenarios, at current prices, 2014-19
- Forecast methodology
- Fan chart explanation
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