Table of Contents
Overview
Executive Summary
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- The market
- Individual premiums expected to show a steady increase
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- Figure 1: Forecast of new individual (long-term) income protection premiums – Fan chart, 2011-21
- Advisers remain the leading distribution channel
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- Figure 2: Distribution of new individual (long-term) income protection contracts, by channel, 2014-16
- Claims values are falling, supporting provider profitability
- Companies and brands
- LV= faces challenge from combined forces of Aviva and Friends Life
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- Figure 3: Estimated market shares of the top five providers of new individual income protection, based on volume sales, 2015
- Providers invest in income protection products to enhance value
- The consumer
- One in ten adults has an income protection product
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- Figure 4: Protection product ownership, December 2016
- A third of non-product holders say they can’t afford it and a third say they don’t need it
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- Figure 5: Reasons for not having protection products, December 2016
- Two fifths say an absence from work of six months or less would leave them struggling
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- Figure 6: Expected impact of lost income on financial stability, December 2016
- Two fifths intend to rely on savings if unable to work
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- Figure 7: Contingency plans if unable to work, December 2016
- Covering home-related outgoings is the biggest priority
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- Figure 8: Interest in features of income protection cover, December 2016
- ‘Fix and flex’ approach favoured by potential customers
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- Figure 9: Interest in features of income protection products, December 2016
- What we think
Issues and Insights
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- Group schemes can continue to expand the market for income protection
- The facts
- The implications
- People are used to relying on contingency plans that lack certainty
- The facts
- The implications
The Market – What You Need to Know
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- New individual policies and premiums are on the up
- Advisers remain the leading distribution channel
- The economic environment is providing good foundations
- New welfare rules may reduce the overall benefit of holding income protection
Market Size and Forecast
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- New policies and premiums expected to grow again in 2016
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- Figure 10: New individual (long-term) income protection sales and average premium, 2011-16
- Group schemes in decline
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- Figure 11: Volume and value of new group (long-term) income protection sales, 2011-16
- Individual premiums expected to show a steady increase
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- Figure 12: Forecast of new individual (long-term) income protection premiums – Fan chart, 2011-21
- Figure 13: Forecast of new individual (long-term) income protection premiums, 2011-21
- Forecast methodology
- The impact of the EU referendum vote
- Trajectory of market in previous slowdown
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- Figure 14: Forecast of new individual (long-term) income protection premiums allowing for Brexit, 2011-21
- Income protection likely to suffer in face of income squeeze
Channels to Market
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- IFAs continue to dominate distribution…
- …but there are developments within the direct channel
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- Figure 15: Distribution of new individual (long-term) income protection premiums, by channel, 2014-16
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- Figure 16: Distribution of new individual (long-term) income protection contracts, by channel, 2014-16
- Figure 17: Distribution of new individual (long-term) income protection premiums and contracts, by channel, 2014-16
Market Drivers
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- A third of adults have less than £5,000 in savings
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- Figure 18: Level of savings and investments, excluding main home and pension savings, December 2016
- House purchase loans edge up, with first-time buyers driving growth
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- Figure 19: Volume of house purchase loans, by type of borrower, 2007-16
- Falling unemployment rate has helped support income protection sales
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- Figure 20: Unemployment rate, January 2010-August 2016
- Average weekly earnings grew during 2016
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- Figure 21: Real average weekly earnings, regular pay (excluding bonuses and arrears of pay), seasonally adjusted, January 2010-October 2016
- Claims values are falling, supporting provider profitability
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- Figure 22: Summary of income protection claims paid and declined, 2015
- Group schemes look to SMEs to boost growth
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- Figure 23: Group income protection schemes, estimated number and premiums receivable in year, 2010-15
Regulatory and Legislative Changes
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- Welfare reform has limited the overall benefits of income protection
- Seven Families initiative has had a positive impact on product perception
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- Figure 24: List of providers that funded the seven families campaign, 2014-15
Companies and Brands – What You Need to Know
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- LV= faces challenge from combined forces of Aviva and Friends Life
- The income protection gap has enticed investment from providers
- Providers look to use events to improve understanding and awareness
Market Share
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- LV= is investing to keep hold of the top spot
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- Figure 25: Estimated market shares of the top five providers of new individual income protection, based on volume sales, 2015
Competitive Strategies
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- Providers invest in income protection products to enhance value
- The Exeter replaces IP product range
- Aviva launches Income Protection+ following Friends Life integration
- Insurers upgrade digital platforms to support advisers and customers
- The Exeter launches new protection platform
- L&G extends adviser system with customer-operated features
- Providers due to adopt paperless GP reporting technology
Advertising and Marketing Activity
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- Overall advertising on protection products has grown…
- …but income protection adspend remains very limited
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- Figure 26: Total above-the line, online display and direct mail advertising expenditure on protection products, 2013/14-2015/16
- Providers turn to events to help spread the word
- Nielsen Ad Intel coverage
The Consumer – What You Need to Know
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- 10% of adults have a form of income protection
- Affordability perceptions are holding the market back
- 41% would struggle after an absence from work of six months or less
- Home-related outgoings represent an opportunity for product propositions
- Fixed premiums and flexible cover are preferred by potential customers
Protection Product Ownership
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- Consumers have wide range of options but most choose to forego cover
- One in ten adults has a form of income protection product
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- Figure 27: Protection product ownership, December 2016
- Those with the most money in reserve are still more likely to hold income protection
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- Figure 28: Protection product ownership, by type of product and amount of existing savings/investments (excluding pensions and main home), December 2016
Reasons for Not Having Protection Products
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- Affordability and need are main barriers
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- Figure 29: Reasons for not having protection products, December 2016
- Negative press could be limiting income protection among key markets
- Helping people to identify their own protection gap
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- Figure 30: Reasons for not having protection products, by amount of existing savings/investments (excluding pensions and main home), December 2016
Expected Impact of Lost Income on Financial Stability
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- Two fifths say an absence from work of six months or less would leave them struggling
- Robo-advice could help people to identify their requirements
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- Figure 31: Expected impact of lost income on financial stability, December 2016
- People factor in their savings buffer as a form of protection
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- Figure 32: Expected impact of lost income on financial stability, by amount of existing savings/investments (excluding pensions and main home), December 2016
- Those that don’t think they need protection may still be exposed
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- Figure 33: Expected impact of lost income on financial stability, by reasons for not having protection products, December 2016
Contingency Plans if Unable to Work
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- Two-fifths intend to rely on savings if unable to work
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- Figure 34: Contingency plans if unable to work, December 2016
- Almost half intend to rely on one contingency plan
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- Figure 35: Repertoire of contingency plans if unable to work, by demographics, December 2016
- Millennials are more inclined to rely on credit
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- Figure 36: Contingency plans if unable to work, by age, December 2016
- Those that can’t afford protection will look to family and friends for support
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- Figure 37: Contingency plans if unable to work, by reasons for not having protection products, December 2016
Interest in Aspects of Income Protection Cover
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- Covering home-related outgoings is the biggest priority
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- Figure 38: Interest in features of income protection cover, December 2016
- Home-related protection policies show potential among consumers
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- Figure 39: Interest in features of income protection cover, repertoire analysis, December 2016
- Millennials show greater interest in covering childcare and mobile phone bills
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- Figure 40: Interest in features of income protection cover, December 2016
Interest in Features of Income Protection Products
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- ‘Fix and flex’ approach favoured by potential customers
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- Figure 41: Interest in features of income protection products, December 2016
- Millennials looking for healthy living incentives
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- Figure 42: Interest in features of income protection products, by age, December 2016
Appendix – Data Sources, Abbreviations and Supporting Information
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- Product definitions
- Income protection
- Accident, sickness and unemployment (ASU) insurance
- Personal accident and sickness insurance
- Unemployment cover
- Personal accident insurance
- Mortgage payment protection insurance (MPPI)
- Critical illness cover
- Life insurance
- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
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- Figure 43: Forecast of new individual (long-term) income protection premiums, at current and constant prices, 2011-21
- Forecast methodology
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