Income Protection - UK - April 2021

OVERVIEW
Key issues covered in this Report
COVID-19: market context
Economic and other assumptions
Products covered in this Report
Income protection
Accident, sickness and unemployment insurance
Personal accident and sickness insurance
Unemployment cover
Mortgage payment protection insurance
Critical illness cover
Life insurance
EXECUTIVE SUMMARY
Impact of COVID-19 on income protection
Figure 1: Short, medium and long-term impact of COVID-19 on income protection, April 2021
The market
An extended period of growth comes to an end…
…but the market is set to recover from 2021
Figure 2: Market size and forecast for sales of new individual protection policies, by value, 2015-25
Figure 3: Market size and forecast for sales of new individual protection policies, by volume, 2015-25
69% of new business sold via IFAs in 2020
New schemes helping to support demand for mortgage lending
Government pressed to offer Universal Credit disregard to renters
Private rental market has expanded considerably
Companies and brands
Aviva retains position as market leader in 2019
Smaller players gaining market share
Figure 4: Market share of the leading providers of individual income protection policies, based on volume sales, 2019
Providers work to improve access via simpler underwriting and adviser support
New products launched to appeal to a wider target market
The consumer
A tenth of Britons own an income protection policy
Figure 5: Protection product ownership, December 2020
Two in five households would begin to struggle within six months of not working
Figure 6: Resilience of household finances, December 2020
No evidence that interest in income protection has risen during the pandemic
Figure 7: Interest in income protection products, February/December 2020
Just over two fifths of working adults say they are on statutory sick pay
Figure 8: Entitlement to sick pay, by age and gender, December 2020
Cost the main obstacle to policy purchase…
Figure 9: Barriers to purchase for income protection, December 2020
…but a lack of awareness is also plaguing the market
Figure 10: Barriers to purchase among those who are interested in taking out income protection insurance compared to all others, December 2020
Advisors play the key role in persuading consumers
Figure 11: Triggers for buying income protection insurance, December 2020
Hospitalisation benefit the most valued additional policy feature
Figure 12: Appealing features of an income protection policy, December 2020
ISSUES AND INSIGHTS
COVID-19-related challenges will linger even as pandemic subsides
New approaches to marketing required to reach the under-protected
THE MARKET – KEY TAKEAWAYS
An extended period of growth comes to an end…
…but the market is set to recover from 2021
69% of new business sold via IFAs in 2020
Government schemes helping to support demand for mortgage lending 
An expanded private rental market offers untapped opportunities 
Government pressed to offer Universal Credit disregard to renters
Rising unemployment will dent growth prospects
MARKET SIZE AND FORECAST
An extended period of growth comes to an end due to COVID-19
Figure 13: Short, medium and long-term impact of COVID-19 on income protection, April 2020
Premiums dip in 2020
Figure 14: New individual income protection sales and average premium, 2016-20
The market is set to recover in 2021
Figure 15: Market size and forecast for sales of new individual protection policies, by value, 2015-25
Figure 16: Market size and forecast for sales of new individual protection policies, by value, 2015-25
Volume sales to recover more slowly
Figure 17: Market size and forecast for sales of new individual protection policies, by volume, 2015-25
Figure 18: Market size and forecast for sales of new individual protection policies, by volume, 2015-25
New group contract business continued to grow in 2020
Figure 19: Volume and value of new group income protection sales, 2016-20
Market drivers and assumptions
Figure 20: Key drivers affecting Mintel’s market forecast, 2015-25 (prepared on 5 April 2021)
Learnings from the last recession
Figure 21: New individual income protection sales and average premium, 2008-12
Forecast methodology
CHANNELS TO MARKET
Growth in sales through independent advice channels 
Figure 22: Distribution of new individual (long-term) income protection contracts, by volume, 2015-20
Figure 23: Distribution of new individual (long-term) income protection contracts, by value, 2015-20
Bancassurance sales decline in 2020
Figure 24: Value of income protection (long-term) bancassurance premiums, 2015-20
MARKET DRIVERS
Growth in the value of loans for house purchase comes to an end in 2020
New government support for FTBs could help boost demand for protection 
Figure 25: Value of residential loans to owner occupiers, by type of borrower, 2016-20
Value of remortgage lending plummets by nearly a fifth in 2020
Figure 26: Value of residential loans for remortgages and further advances, 2016-20
One in five now lives in privately rented accommodation
Figure 27: Trends in housing tenure of adults aged 16 and over, by percentage of households living in each type of tenure, 2008/09-2018/19
Rising unemployment will hit growth prospects
Figure 28: Annual unemployment rate, 2017-25 (forecast)
Growth in self-employment has faltered 
Figure 29: Number of self-employed workers aged 16 years and older (seasonally adjusted), Q1 2010 to Q4 2020
Number of new claims paid rises by a fifth in 2019
Figure 30: Number of new claims paid vs average value of new claims paid, 2015-19
REGULATORY AND LEGISLATIVE CHANGES
FCA provides guidance on supporting customers in financial difficulty
Government urged to extend Universal Credit disregard to renters
Insurers commit to the Explaining Underwriting Decisions agreement
COMPANIES AND BRANDS – KEY TAKEAWAYS
Aviva retains position as market leader in 2019 
Smaller players are gaining market share
Providers start to roll back COVID-19 changes
Providers work to improve access to IP
New products launched to appeal to a wider target market
MARKET SHARE
Aviva holds on to its position as the market leader
Legal &amp; General experiences solid growth
Smaller players also perform well…
…with those outside the top five increasing market share to 31% in 2019
Figure 31: Market share of the leading providers of individual income protection policies, based on volume sales, 2019
COMPETITIVE STRATEGIES AND LAUNCH ACTIVITY
Providers start to move beyond COVID-19
Holloway Friendly removes COVID-19 exclusions
LV= reinstates shorter waiting periods
Aviva introduces COVID-19 rehab support
British Friendly incorporates a benefit reduction option
Providers work to improve access to IP via simpler underwriting…
Underwriting for MetLife’s new policy determined by five health questions
LV= adjusts non-medical limits and eliminates additional evidence requirements
Legal and General increases automatic underwriting limits
British Friendly removes non-medical limits
…and enhancements to adviser support services
Zurich implements pre-application underwriting indicator tool
The Exeter launches new tools that facilitate the income protection advice process
Providers seek to broaden the appeal of IP
Holloway Friendly targets people in lower-risk occupations
L&G seeks to address initial affordability and the needs of small business owners
Legal and General reaches out to renters via Tenant Shop partnership
Anorak partners with Canopy to improve IP access to renters
Friendly societies expand their range of free IP benefits
The Exeter adds to range of services available on its Healthwise app
Shepherds Friendly expands rehab support benefits
Cirencester Friendly introduces free 24-hour remote GP service
LV= acquisition by Bain Capital under inquiry
THE CONSUMER – KEY TAKEAWAYS
Some may have developed a false sense of financial security during the pandemic
Lack of access to generous sick pay benefits makes IP relevant for many 
Consumers need to be urged to ‘stress test’ their financial resilience 
Unawareness preventing the market from expanding its reach
A fresh approach is required to reach the under-protected 
IMPACT OF COVID-19 ON CONSUMER BEHAVIOUR
Consumers’ sense of financial wellbeing has grown during the pandemic…
…but some may have a false sense of security 
Figure 32: The Financial Wellbeing Index, December 2019-March 2021
Consumer confidence back near pre-COVID-19 levels in early 2021…
Figure 33: The Financial Confidence Index, December 2019-March 2021
…but many will remain cautious about spending
Figure 34: Changes in household finances, December 2019-March 2021
PROTECTION PRODUCT OWNERSHIP
One in 10 has income protection 
Figure 35: Protection product ownership, December 2020
Little change in penetration levels
Figure 36: Income protection product ownership, November 2014-December 2020
Ownership remains skewed to the affluent and those with dependants
Plenty of untapped potential among under-protected renters
Figure 37: Any protection product ownership versus any income protection ownership, by housing tenure, December 2020
Women offer an underdeveloped market
Figure 38: Protection product ownership, by gender, December 2020
RESILIENCE OF HOUSEHOLD FINANCES
13% of households risk running out of money within a month
Figure 39: Resilience of household finances, December 2020
Renters need income protection
Figure 40: Household financial resilience, by housing tenure, December 2020
Households in Scotland and Northern England lack resilience
Figure 41: Household financial resilience, by region, December 2020
INTEREST IN INCOME PROTECTION PRODUCTS
Interest in income protection has not improved during the pandemic
Figure 42: Interest in income protection products, February/December 2020
Under-35s nearly twice as likely as average to be interested 
A lack of awareness may be holding women back
Figure 43: Interest in income protection products, by age and gender, December 2020
ENTITLEMENT TO SICK PAY
Over two in five working adults on statutory sick pay
Figure 44: Entitlement to sick pay, December 2020
Under-35s are least likely to be eligible for longer-term sick pay benefits
Figure 45: Entitlement to sick pay, by age and gender, December 2020
BARRIERS TO PURCHASE
Cost is the main objection
Figure 46: Barriers to purchase for income protection, December 2020
Awareness is a major barrier 
Figure 47: Barriers to purchase among those who are interested in taking out income protection insurance compared to all others, December 2020
Many who need IP most are unaware it exists
Figure 48: Proportion of working UK adults who have not heard of income protection, by gender, age, and housing situation, December 2020
TRIGGERS FOR BUYING INCOME PROTECTION
Recommendations are key to persuading consumers
Figure 49: Triggers for buying income protection insurance, December 2020
APPEALING FEATURES OF A POLICY
Hospitalisation benefit is the most sought-after extra policy feature
Features that help to preserve cover or lower premiums are also attractive
Figure 50: Appealing features of an income protection policy, December 2020
Older users seek additional benefits…
Figure 51: Appeal of selected features of an income protection policy, by age, December 2020
…while younger ones seek support and advice
Figure 52: Appeal of selected features of an income protection policy, by age, December 2020
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology
APPENDIX – MARKET SIZE AND FORECAST
Forecast methodology