Table of Contents
Executive Summary
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- The market
- A market in decline…
- …but with the capability to turn things around
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- Figure 1: Forecast of new individual term assurance premiums – Fan chart, 2010-20
- Companies and brands
- Aviva closes gap on market leader, Legal & General
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- Figure 2: Top five providers’ share of new individual term assurance sales (volume), 2014
- The consumer
- 32% of UK adults have an individual life insurance policy
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- Figure 3: Ownership of individual life insurance, March 2015
- Level term is more common than decreasing term
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- Figure 4: Type of life insurance policy owned, March 2015
- 58% of term policyholders also have critical illness cover
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- Figure 5: Proportion of term policyholders who additionally took out critical illness cover, March 2015
- 72% of policyholders are paying under £30 a month for their term-only policy
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- Figure 6: Monthly premium paid by term assurance policyholders, March 2015
- 59% of adults say life insurance is “worth having at the right price”…
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- Figure 7: Agreement with statements about life insurance (relating to cost and affordability), March 2015
- …while 57% are confused by the amount of policy variation
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- Figure 8: Agreement with statements about life insurance (relating to product complexity, relevance and advice), March 2015
- The top descriptive word chosen for life insurance is “expensive”
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- Figure 9: Words chosen to describe life insurance, March 2015
- 54% expect a major change in their personal circumstances over the coming year
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- Figure 10: Changes to personal circumstances and lifestage events expected within the coming year, March 2015
Issues and Insights
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- Less than a third of UK adults have some form of life protection
- The facts
- The implications
- Half of all adults think it’s too dear for those with a medical condition
- The facts
- The implications
- Many consumers are confused by the range of policy types and variations
- The facts
- The implications
The Market – What You Need to Know
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- Falling sales…
- …but the performance of the two main sectors varies considerably
- Introduction of MMR – still too early to assess impact
- RDR is largely responsible for the sharp decline in bancassurance sales
- Product penetration has not increased over the past few years and may even have fallen
- Life assurers must adapt their propositions in light of changing demographics…
- …and shifting tenure patterns
Market Size and Forecast
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- Sales continue to fall lower
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- Figure 11: New individual term assurance sales and average annual premium, 2010-14
- Could a slow recovery be on the cards?
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- Figure 12: Forecast of new individual term assurance volume sales – Fan chart, 2010-20
- Figure 13: Forecast of new individual term assurance premiums – Fan chart, 2010-20
Market Segmentation
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- Mortgage term sales grew 7% in 2014, driven by higher first-time buyer loans…
- …while protection term sales fell by 21%
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- Figure 14: Volume of new individual regular-premium term assurance policy sales, by policy type, 2010-14
- Term assurance costs less than an annual gym pass
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- Figure 15: Average new premium – Mortgage term versus protection term, 2010-14
- The majority of mortgage business is sold on a decreasing term basis
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- Figure 16: Summary of new term assurance business, by type of policy, 2014
Channels to Market
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- Ongoing decline of bancassurance channel
- Restricted advisers retain largest slice of mortgage term business
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- Figure 17: Distribution of new mortgage term assurance business, by channel, 2013 and 2014
- Non-advised sales of protection term assurance grew in 2014, but not enough to offset a sharp fall in restricted advice sales
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- Figure 18: Distribution of new protection term assurance business, by channel, 2013 and 2014
Market Penetration
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- Large swathes of the population are unprotected
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- Figure 19: Segmentation of UK adult population, by life insurance provision, March 2015
- Psychological barriers are the hardest to tackle
- Group life cover may not be an adequate substitute
- In-force individual life policies declined in 2013
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- Figure 20: Number of individual term and whole-of-life assurance policies in force, by type, 2006-13
- Mortgage term customers are much more likely to take out a critical illness rider than protection term customers
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- Figure 21: Critical illness rider benefits as a proportion of new individual term assurance business and new standalone critical illness business, 2010-14
Market Drivers
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- Declining death rate has a positive impact on claim costs
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- Figure 22: Number of deaths in England and Wales and mortality rate, by age and gender, 2013
- Life insurers must adapt to an ageing target audience…
- …and to changing tenure trends
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- Figure 23: UK housing stock, by tenure, 1992-2012
- More people are buying and selling their homes, but transaction levels are still well below their pre-crisis peak
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- Figure 24: Number of UK residential property transactions with a value of £40,000 upwards – seasonally adjusted, 2006-14
- First-time buyer loans up 16% in 2014
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- Figure 25: Volume of house purchase loans, by type of borrower, 2006-14
- Average sum insured increases to around £133,000
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- Figure 26: Average sum insured for new term assurance policies versus average first-time buyer advance, 2003-14
Regulation Update
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- The Mortgage Market Review (MMR)
- Solvency II Directive
Key Players – What You Need to Know
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- Mergers and acquisitions reshape the top five
- Product development focuses on simplification
- Increase in advertising activity
Market Share
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- The industry has seen some notable M&A activity recently
- Legal & General remains the largest life insurer, but Aviva is closing the gap
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- Figure 27: Top five providers of individual term assurance, by sales volumes, 2013 and 2014
Companies and Products
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- Legal & General
- Market position
- Recent financial performance
- Recent activity
- Corporate strategy
- Aviva
- Market position
- Recent financial performance
- Recent activity
- Corporate strategy
- Friends Life
- Market position
- Recent financial performance
- Recent activity
- Corporate strategy
- LBG (Scottish Widows)
- Market position
- Recent financial performance
- Recent activity
- Corporate strategy
- AIG Life (formerly Ageas Protect)
- Market position
- Recent financial performance
- Recent activity
- Corporate strategy
Brand Communication and Promotion
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- Term assurers double the amount they spend on advertising
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- Figure 28: Advertising expenditure on life assurance products, by product category, 2010/11-2014/15
- Direct life insurer, Neilson is the highest-spending advertiser…
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- Figure 29: Top 10 advertisers of (term) life insurance, 2012/13-2014/15
- …investing heavily in TV advertising for maximum exposure
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- Figure 30: Proportional distribution of (term) life advertising expenditure, by media type, 2012/13-2014/15
The Consumer – What You Need to Know
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- Low ownership levels
- Cost and affordability
- Consumer confusion over different product types
- 58% of term policyholders have additional critical illness cover
- Still some prevailing trust issues
- Lifestage events prompt the purchase of life cover or a policy review
Ownership of Life Insurance
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- 32% have an individual life insurance policy
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- Figure 31: Ownership of individual life insurance, March 2015
- Take-up of life cover increases with wealth
- Life insurers need to improve targeting of the self-employed
- Only 20% of private renters have life insurance
- The most common type is a level term assurance policy
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- Figure 32: Type of life insurance policy owned, March 2015
- Older people are more likely to have whole-of-life cover
- 37% of life insurance customers have a joint-life policy
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- Figure 33: Proportion of policyholders with a single or joint-life policy, by policy type, March 2015
Critical Illness Add-on
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- 58% of term life policyholders took out additional critical illness cover
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- Figure 34: Proportion of policyholders who additionally took out critical illness cover, by policy type, March 2015
- Joint-life policyholders are more likely to have it
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- Figure 35: Proportion of policyholders who additionally took out critical illness cover, by single or joint life, March 2015
Cost of Cover
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- 72% of customers are paying under £30 a month for term life-only insurance
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- Figure 36: Monthly premium paid, by policy type, March 2015
- 13% of joint-life policyholders are paying over £50 a month in premiums versus 5% of single-life policyholders
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- Figure 37: Monthly premium paid by policy type, by single or joint-life policy, March 2015
Attitudes towards Life Insurance
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- 59% of adults think life insurance is worth having at the right price…
- …with parents and mortgage holders even more likely to agree…
- …but 51% say it’s too expensive for people with pre-existing medical condition
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- Figure 38: Agreement with statements about life insurance, March 2015
- 70% of term assurance customers say it’s easy to find affordable cover online…
- …but only 48% think insurance companies can be trusted to treat their customers fairly
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- Figure 39: Agreement with statements about life insurance, by policyholders and non-policyholders, March 2015
- 90% of policyholders would pick positive words to describe life insurance
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- Figure 40: Words chosen to describe life insurance, March 2015
Upcoming Lifestage Events
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- 22% of respondents are planning a home move within the next 12 months…
- …necessitating a review of their protection needs
- 37% are planning a work-related change
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- Figure 41: Changes to personal circumstances and lifestage events expected within the coming year, by total sample, life policyholders and non-policyholders, March 2015
Appendix – Definitions and Abbreviations
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- Product definitions
- Intermediary market definitions
- Abbreviations
Appendix – Market Size and Forecast
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- Total market forecast – best- and worst-case scenarios
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- Figure 42: Forecast of new individual term assurance volume sales – Best- and worst-case scenarios, 2015-20
- Figure 43: Forecast of new individual term assurance premiums – Best- and worst-case scenarios, 2015-20
- Market value forecast summary
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- Figure 44: Forecast of new individual term assurance premiums, at current and constant prices, 2010-20
- Forecast methodology
- Fan chart explanation
Appendix – Claims Statistics
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- Protection claims paid and declined
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- Figure 45: Summary of protection claims paid and declined, by product type, 2013
- Reasons for declining a claim
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- Figure 46: Proportional distribution of declined claims, by reason and product type, 2013
Appendix – Additional Information on Recent Initiatives and Regulations
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- Government initiatives to help homebuyers
- Stamp duty reform
- Help to Buy
- The Simple Financial Products initiative
- Other recent regulatory milestones
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