Table of Contents
Executive Summary
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- The market
- Declining sales impact on new business premiums
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- Figure 1: Forecast of new individual critical illness premiums, at current prices – Fan chart, 2010-20
- Providers improve critical illness cross-sale rates
- Distribution trends: bancassurance channel continues to decline
- First-time buyer numbers increase, but outlook for mortgage market is uninspiring
- MMR’s introduction has not led to higher protection sales in 2015
- Key players
- A heavily concentrated market
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- Figure 2: Estimated market shares of the top five providers of new individual critical illness cover, 2013 and 2014
- Providers explore ways of making the product more appealing
- The consumer
- Only 8% of adult internet users are covered
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- Figure 3: Ownership of protection insurance, by total sample, parents and mortgage holders, December 2015
- ‘It’s too dear’ say 40% of the non-insured
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- Figure 4: Reasons for not having critical illness cover – top seven only, December 2015
- Developing a critical illness could put a household under serious financial strain
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- Figure 5: Ability to manage financially if unable to work due to serious illness, December 2015
- A change in fortune is most likely to prompt people to consider the product
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- Figure 6: Factors which might prompt consideration of the product – top seven only, December 2015
- 31% believe the onus is on individuals to ensure their financial security
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- Figure 7: Agreement with statements about critical illness insurance and the need for financial protection, by those with cover and those without, December 2015
- 33% have experience of a critical illness – either directly or indirectly…
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- Figure 8: Personal experience of suffering a serious or life-threatening illness, December 2015
- …while 20% are worried about themselves or another family member becoming seriously ill in the future
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- Figure 9: Concerns about suffering a serious or life-threatening illness, December 2015
- What we think
Issues and Insights
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- Getting the price right
- The facts
- The implications
- Helping people identify their own protection needs
- The facts
- The implications
The Market – What You Need to Know
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- Volume sales down by 13% in 2015
- Mortgage term customers more likely to take out critical illness cover
- 90% of critical illness sales in 2015 were generated by advisers
- First-time buyer numbers up, but affordability pressures remain
- MMR yet to exert a positive influence over sales of protection insurance
Market Size and Forecast
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- Reduction in number of in-force policies
- 2015 witnesses further drop in new sales
- Providers increase the cost of cover
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- Figure 10: Volume and value of new individual critical illness sales and average annual premium, 2010-15
- Best-case scenario: steady premium growth over the next five years
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- Figure 11: Forecast of new individual critical illness premiums, at current prices – Fan chart, 2010-20
- Volume sales: rapid slowdown in the rate of decline
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- Figure 12: Forecast of new individual critical illness policy sales – Fan chart, 2010-20
- Significant pressures and challenges remain
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- Figure 13: Forecast of new individual critical illness premiums, at current and constant prices, 2010-20
- Forecast methodology
Market Segmentation
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- The vast majority of policies are sold as a rider benefit
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- Figure 14: New individual critical illness sales – rider benefit versus standalone policies, 2010-15
- Mortgage term customers are now twice as likely to take out a critical illness rider as protection term customers
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- Figure 15: Critical illness (CI) rider benefits as a proportion of new individual term assurance business, 2010-15
Channels to Market
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- Decline in critical illness rider sales coming via advice channels…
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- Figure 16: Volume sales of new term insurance policies with individual critical illness riders, by channel, 2013-15
- …although intermediaries still account for 90% of sales
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- Figure 17: Proportional distribution of new individual term critical illness riders, by channel, 2013-15
- Decline of the bancassurance channel
Market Drivers
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- Home purchase loans down 1% in 2015
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- Figure 18: Volume of house purchase loans, by type of borrower, 2006-15
- Changing tenure patterns
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- Figure 19: UK housing stock, by tenure, 1993-2013
- Living longer means there’s a greater chance of ill health in later years
- Cancer is the top reason for claiming on a critical illness policy
- Total cost of critical illness claims grew 6% in 2014
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- Figure 20: Summary of critical illness and total permanent disability (TPD) claims paid and proportion of declined claims, 2013 and 2014
- Fall in proportion of declined claims due to non-disclosure and definition of claim not being met
Regulatory and Legislative Changes
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- Solvency II Directive comes into force
- MMR has yet to make any discernible difference to protection sales
Key Players – What You Need to Know
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- A heavily concentrated market
- Insurers adopt diverging strategies
- Paltry amount spent on above-the-line advertising
Market Share
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- Larger players bucked the market trend in 2014
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- Figure 21: Volume sales and market shares of the top five providers of new individual critical illness cover, 2013 and 2014
- Legal & General’s market-leading position under threat
- Four of the top five grew sales volumes and market share in 2014 – bucking the overall market trend
Competitive Strategies
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- Shifting market dynamics
- Increasing market consolidation
- Aviva’s acquisition of Friends Life means the combined group can challenge Legal & General’s market-leading position
- AIG acquires Ageas Protect and rebrands as AIG Life
- Canada Life re-enters individual protection market
- Distribution developments
- Introducing the innovative new platform, UnderwriteMe
- Scottish Widows re-enters adviser market with protection platform
- LifeQuote launches protection quotes to tackle cash flow pressures
- Product development
- Providers seek to make the product more attractive by enhancing cover
- Others seek to simplify propositions in order to provide cheaper cover
Advertising and Marketing Activity
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- Critical illness insurers make limited use of above-the-line advertising
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- Figure 22: Total above-the-line, online display and direct mail advertising expenditure on life protection products, 2011-15
- Reasons for the lack of adspend
- Nielsen Media Research coverage
The Consumer – What You Need to Know
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- Only 8% of adult internet users are covered
- ‘It’s too dear’ say 40% of the non-insured
- Developing a critical illness could put a household under serious financial strain
- A change in fortune is most likely to prompt people to consider the product
- Less than a third believe the onus is on them to ensure their own financial security
- 33% have experience of a critical illness – either directly or indirectly
Ownership of Protection Insurance
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- Only 8% of UK adults have critical illness cover
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- Figure 23: Ownership of protection insurance, December 2015
- Take-up increases significantly among parents and mortgage holders
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- Figure 24: Ownership of protection insurance, by parents, mortgage holders and life insurance policyholders, December 2015
- Broaden the product’s appeal to non-mortgage holders
Reasons for Not Having Cover
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- It’s too expensive
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- Figure 25: Reasons for not having critical illness cover, December 2015
- There’s no benefit to having it
- A lack of trust remains a key barrier
- Other reasons are less commonly expressed
- Parents are less likely to say they can’t see the benefit of having cover
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- Figure 26: Reasons for not having critical illness cover, by parents and mortgage holders, December 2015
Potential Financial Impact of Ill Health
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- Figure 27: Ability to manage financially if unable to work due to serious illness, by all non-insured, parents and mortgage holders, December 2015
- 35-44-year-olds are at most risk
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Factors That Might Prompt Purchase
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- 25% of the non-insured rule out ever taking out cover
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- Figure 28: Factors that might prompt consideration of the product, December 2015
- Improved affordability could increase consideration
- Simplifying policies could aid consumer understanding
- Promoting fixed premiums could also widen appeal
- Lifestage events can provide the catalyst for buying cover
Attitudes toward the Product
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- 29% of the non-insured agree that individuals have a responsibility to protect their own future financial security…
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- Figure 29: Agreement with statements about critical illness insurance and the need for financial protection, by those with cover and those without, December 2015
- …while 32% think it’s better to save your money than pay for insurance you may never need
Experience of Serious and Life-threatening Illnesses
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- 17% of UK adults have either suffered a serious illness themselves or has a partner who has…
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- Figure 30: Personal experience of or concerns about suffering a serious or life-threatening illness, by those with cover and those without, December 2015
- …which could make them potentially ineligible for critical illness insurance
Appendix – Data Sources, Abbreviations and Supporting Information
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- Product definitions
- Intermediary market definitions
- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
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- Total market value forecast – Best- and worst-case scenarios
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- Figure 31: Forecast of new individual critical illness premiums – Best- and worst-case scenarios, at current prices, 2015-20
- Total market volume forecast – Best- and worst-case scenarios
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- Figure 32: Forecast of new individual critical illness policy sales – Best- and worst-case scenarios, 2015-20
- Forecast methodology
Appendix – Other Relevant Regulatory and Legislative Changes
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- Other recent regulatory and legislative developments impacting on the protection industry
- Government initiatives to help homebuyers
- Stamp duty reform
- Help to Buy
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