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Term Assurance - UK - July 2012

INTRODUCTION
Definitions and report scope
Term assurance
Abbreviations
EXECUTIVE SUMMARY
The market
Value of new term assurance premiums is expected to increase
Figure 1: Forecast for total value of new individual regular-premium term assurance sales, 2007-17
IFAs account for a large part of new term assurance premiums
Market factors
Mortgage market difficulties are having an impact on new term assurance sales
ABI considers protection website and awareness day
Gender-neutral pricing and I-E tax changes will have an impact on premiums
Companies, brands and innovation
Top five providers account for 79% of new term assurance sales
Figure 2: Top five term assurance providers, by new individual sales, 2011
Brand promotion
Who’s innovating?
The consumer
Life insurance ownership
Figure 3: Life insurance ownership, May 2012
Purchasing triggers
Figure 4: Purchase triggers, May 2012
Purchasing behaviour
Figure 5: Purchasing behaviour, May 2012
Life insurance monthly premiums
Attitudes towards life insurance
Figure 6: Attitudes towards life insurance, May 2012
Consumer intentions
What we think
ISSUES IN THE MARKET
How will forthcoming legislative changes have an impact on the term assurance market?
What are main reasons that prompt adults to take-out life insurance?
Do consumers understand life insurance products?
How many adults are thinking about entering the market in the next 12 months?
FUTURE OPPORTUNITIES
Creating a link between rental obligations and term assurance
Pushing the emotional attachment
2015: Access Anything, Anywhere
INTERNAL MARKET ENVIRONMENT
Key points
Subdued mortgage activity is holding back term assurance sales
Figure 7: Number of monthly mortgage approvals for home purchase, January 2004-May 2012
Protection gap remains at £2.4 trillion in 2011
Gender-neutral pricing will distort life insurance premiums…
…as will the I-E tax regime changes
Solvency II Directive to improve standards, but could push up costs
Many IFA firms will leave the market due to the RDR…
…but focus on life and protection products will intensify
Consumer apathy and a lack of engagement present a long-term challenge to the market
Social changes are causing consumers to delay buying cover
BROADER MARKET ENVIRONMENT
Key points
Stuttering economy is a challenge for the term assurance market
Figure 8: GDP quarterly percentage change, Q1 2008-Q1 2012
Complaints about term assurance make up a small percentage of overall disputes
Figure 9: Financial services complaints, by sector, 2009/10-2011/12 (Q1-Q3)
ABI is considering a protection website for consumers…
…and a number of providers give backing to a protection awareness day
Increasing life expectancy has helped to lower premiums
Figure 10: Cohort expected age of death+ at age 60, by gender, 1981-2058
SWOT ANALYSIS
Figure 11: Term assurance – SWOT analysis, 2012
WHO’S INNOVATING?
Key points
Protection academy launched by Aviva and Pink
LV= is the latest insurer to launch an online trust builder tool
Legal & General launches its Healthy Living Programme
Ageas Protect to help IFAs understand legislative changes
Openwork launches protection app for advisers
MARKET SIZE AND FORECAST
Key points
Market pressures have led to a decline in new business in 2011
Figure 12: Volume and value of new individual regular-premium term assurance policy sales, 2005-12(est)
Non-mortgage-related sales continue to increase…
Figure 13: Volume of new individual regular-premium term assurance policy sales, by policy type, 2005-11
…but premiums declined slightly in 2011
Figure 14: Value of new individual regular-premium term assurance policy sales, by policy type, 2005-11
Average term assurance premiums remain the same in 2011
Figure 15: Average annual premiums on new individual regular-premium term assurance policies written, by policy type, 2005-11
 MARKET FORECAST
Value of new term assurance business expected to increase…
Figure 16: Forecast for total value of new individual regular-premium term assurance sales, 2007-17
Figure 17: Forecast for total value of new individual regular-premium term assurance sales, at current and constant prices, 2007-17
…as will the volume of new term assurance contracts
Figure 18: Forecast for total volume of new individual regular-premiums term assurance sales, 2007-17
Figure 19: Forecast for total volume of new individual regular-premiums term assurance sales, 2007-17
Forecast methodology
MARKET SHARE
Key points
Legal & General is still the number one term assurance provider
Figure 20: Top five term assurance providers, by new individual sales, 2010 and 2011
The top five companies have increased their hold on the market
COMPANIES AND PRODUCTS
Aviva
Figure 21: Key financial data for Aviva, 2010 and 2011
Friends Life
Figure 22: Key financial data for Friends Life Group Plc., 2010 and 2011
Legal & General
Figure 23: Key financial data for Legal & General, 2010 and 2011
Lloyds Banking Group
Figure 24: Key financial data for Lloyds Banking Group (insurance segment), 2010 and 2011
RBS/NatWest
Figure 25: Key financial data for RBS, 2010 and 2011
Royal London Group
Figure 26: Key financial data for Royal London Group, 2010 and 2011
BRAND COMMUNICATION AND PROMOTION
Key points
Life protection adspend increased in 2011, driven by over-50s plans
Figure 27: Breakdown of top-level life protection* advertising expenditure, by sub-category, 2008-11
Aviva remains the number one advertiser of life protection/term assurance
Figure 28: Top ten advertisers of life protection/term assurance, 2008-11
Direct mail accounts for 37% of life protection/term assurance adspend
Figure 29: Advertising expenditure on life protection/term assurance, by media type, 2011
CHANNELS TO MARKET
Key points
New business premiums are driven by intermediated distribution
Figure 30: Total new premiums (£m) for individual regular-premium term assurance policies written, by distribution channel, 2005-11
Distribution trends differ between mortgage and non-mortgage-related sales
Figure 31: Total new premiums for individual regular-premium term assurance policies written, by distribution channel and policy type, 2008-11
Internet users exhibit slightly different purchasing trends
Figure 32: Purchasing behaviour, by term assurance ownership, May 2012
LIFE INSURANCE OWNERSHIP
Key points
A fifth of adults have a term assurance policy…
Figure 33: Life insurance ownership, May 2012
…but over 50% of UK adults have no life cover
Term assurance is more popular among 35-54-year-olds
Figure 34: Life insurance ownership, by gender and age, May 2012
Consumer affluence has an impact on product ownership
Figure 35: Life insurance ownership, by gross annual household income, May 2012
Home buyers are more likely to have term assurance
Figure 36: Life insurance ownership, by housing situation, May 2012
Presence of children encourages adults to buy life insurance
Figure 37: Life insurance ownership, by presence of own children, May 2012
A third of consumers have one type of insurance product, but there is some multiple ownership
Figure 38: Repertoire of life insurance ownership, May 2012
PURCHASE TRIGGERS
Key points
Getting a mortgage is the biggest motivator for buying life insurance
Figure 39: Purchase triggers, May 2012
Protecting family is also very important to consumers
Almost a third of adults have no specific reason for buying life insurance
Some consumers have simply ruled themselves out of the market
Figure 40: Purchase triggers, by life insurance ownership, May 2012
Scope for cheaper and simplified products
Figure 41: Purchase triggers, by financial situation, May 2012
Providers need to educate consumers about the intricacies of life insurance
Figure 42: Purchase triggers, by age, May 2012
PURCHASING BEHAVIOUR
Key points
Advised and direct sales are popular among internet users
Figure 43: Purchasing behaviour, May 2012
Affluent consumers are most likely to arrange cover via an IFA
Figure 44: Purchasing behaviour, by gross annual household income, May 2012
Difference in how consumers purchase mortgage and non-mortgage-related term assurance
Figure 45: Purchasing behaviour, by life insurance ownership, May 2012
Access to advice is important for new life insurance sales
Figure 46: Purchasing behaviour, by purchase triggers, May 2012
LIFE INSURANCE MONTHLY PREMIUMS
Key points
A quarter of adults with life insurance pay £10-19 monthly
Figure 47: Monthly premiums, May 2012
Over a fifth are unsure about how much they pay for life insurance
Monthly premiums can depend on how consumers arrange cover
Figure 48: Monthly premiums, by purchasing behaviour, May 2012
A fifth of adults without life insurance would be willing to pay up to £5 per month
Figure 49: Monthly premiums willing to pay, May 2012
Potential to increase ownership among lower earners
Figure 50: Monthly premiums willing to pay, by gross annual household income, May 2012
ATTITUDES TOWARDS LIFE INSURANCE
Key points
Two thirds of internet users appreciate the need for term assurance
Figure 51: Attitudes towards life insurance, May 2012
Professional advice and an established brand are important to many consumers
Many adults would like to have cover but affordability is an issue
Figure 52: Attitudes towards life insurance, by financial situation, May 2012
Trust and perception of value are a sticking point for some adults
Even existing policyholders have concerns about trust and value
Figure 53: Attitudes towards life insurance, by life insurance ownership, May 2012
SWITCHING AND PURCHASING INTENTIONS
Key points
Around 8% of internet users are considering switching or taking out a new term assurance policy
Figure 54: Buying or switching a policy, May 2012
More switching activity than new customers in the term assurance market
Figure 55: Buying or switching a policy, by life insurance ownership, May 2012
APPENDIX – MARKET SIZE AND FORECAST
Figure 56: Best and worst case forecast for total value of new term assurance sales, 2012-17
Figure 57: Best and worst case forecast for total volume of term assurance policies written, 2012-17
APPENDIX – LIFE INSURANCE OWNERSHIP
Figure 58: Life insurance ownership, by demographics, May 2012
Figure 59: Life insurance ownership, by demographics, May 2012
Figure 60: Repertoire of life insurance ownership, by demographics, May 2012
APPENDIX – PURCHASE TRIGGERS
Figure 61: Purchase triggers, by demographics, May 2012
Figure 62: Purchase triggers, by demographics, May 2012
APPENDIX – PURCHASE BEHAVIOUR
Figure 63: Purchasing behaviour, by demographics, May 2012
APPENDIX – LIFE INSURANCE MONTHLY PREMIUMS
Figure 64: Monthly premiums, by demographics, May 2012
Figure 65: Monthly premiums willing to pay, by demographics, May 2012
APPENDIX – ATTITUDES TOWARDS LIFE INSURANCE
Figure 66: Agreement with the statements ‘It's really important for anyone with dependents to have some kind of life insurance cover in case the worst happens’ and ‘I'd only buy life insurance after taking expert advice’, by demographics, May 2012
Figure 67: Agreement with the statements ‘When you are buying life insurance, it is best to stick to the established brands’ and ‘Life insurance doesn't offer good value for money’, by demographics, May 2012
Figure 68: Agreement with the statements ‘I'd like to have life insurance but just can't afford it’ and ‘I don't trust life insurance companies’, by demographics, May 2012
Figure 69: Agreement with the statement ‘Life insurance is not relevant to me’, by demographics, May 2012
APPENDIX – SWITCHING OR PURCHASING INTENTIONS
Figure 70: Buying or switching a policy, by demographics, May 2012
Figure 71: Buying or switching a policy, by demographics, May 2012

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