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Whole of Life Insurance - UK - July 2014
Introduction
 
While the overall whole-of-life insurance market was performing well until 2011, new business sales have been in decline since 2012. The exit of a number of banks and building societies from the over-50s life cover sector triggered a 15% drop in the total volume of new sales in 2013. The simplicity and affordable premiums of guaranteed acceptance plans appeal to the mass market and have traditionally driven much of the sales growth in the whole-of-life market.

A growing ageing population in the UK provides an expanding target market for guaranteed acceptance plans, while persistent funeral inflation brings into focus the importance for the over-50s to ensure their families are not burdened by the rising funeral costs. Consequently, the appetite for over-50s whole-of-life insurance will remain and is likely to strengthen, returning the market to its growth trend. Moreover, competition in the whole-of-life market is increasing despite the current dominance of the top five providers commanding 86% of all new individual product sales in 2013. The arrival of new providers such as British Seniors in the over-50s market has led to further direct sales as opposed to sales through partnership brands as well as greater product innovation.

This report examines the whole-of-life insurance market with particular focus on the over-50s guaranteed acceptance plan sector. Drawing on a range of information sources, it provides a comprehensive overview of how the market is evolving, as well as recent product provider activity. It also explores consumer behaviour with regards to product ownership, providing insight into the attitudes towards life insurance and financial planning by analysing the results of Mintel’s independently commissioned face-to-face consumer survey.

Report scope and definitions
Life insurance is a long-term policy, which pays out a lump sum in the event of the policyholder’s death, with the purpose of protecting dependents against financial hardship. It is usually available on a single or joint life basis, with benefits including paying out on the diagnosis of a terminal illness. There are two main types of life insurance: term life insurance and whole-of-life insurance.

●	Term life insurance (or term assurance): provides life cover for a fixed term and only pays out if the policyholder dies within that limited period of time. Examples of term life insurance include mortgage-linked term insurance policies which are specifically designed to protect the repayment of a mortgage. Although reference is made to term insurance products, these are not covered extensively here, but form the focus of a separate Mintel report: Term Assurance – UK, July 2014.
●	Whole-of-life insurance: covers the policyholder for the duration of their life, and consequently always pays out upon their death as long as the policy conditions are met. There are two main forms of whole-of-life insurance, targeted towards different demographics: the over-50s guaranteed acceptance plans and the underwritten whole-of-life insurance, which includes investment-based policies used by more affluent groups with the main purpose of minimising their inheritance tax obligations. The focus of this report is on the over-50s market although reference is frequently made to the other whole-of-life insurance market.
●	Guaranteed acceptance plan: is a type of whole-of-life policy targeted at the over-50s with usually an upper age limit on taking out one of these products, typically age 75-85. Many of these insurance policies are taken out with the purpose of covering funeral expenses and some have funeral benefit options attached. This means that they are designed to provide funds towards the cost of a funeral, and some may include arrangements for the conducting of the funeral. As this is a simple, low-premium product, most over-50s guaranteed acceptance plans are sold without advice, resulting in higher volume and lower value sales compared to the fully underwritten whole-of-life policies.
●	Prepaid funeral plan: is a product that allows the plan holder to pre-arrange and prepay for their funeral either in one lump sum or via instalments over a set period of time (usually between one and five years). This is not an insurance contract, rather a competitor product to guaranteed acceptance insurance plans, which are often used to meet funeral costs. The money paid by the plan holder is put into a trust fund (as opposed to an insurance policy), and therefore comes under the responsibility of trustees. Most funeral plans are provided by firms that are registered with, and regulated by, the Funeral Planning Authority.
●	Endowment policy: is a policy which offers life insurance cover with a savings policy. The policy exists for an agreed term, the minimum term usually being 10 years, but can reach 15 or 20 years up to a certain age limit. Historically, endowment policies were taken out with a mortgage, although this is much less common now. They are designed to pay out an investment return at the end of the policy term or a lump sum if the policyholder dies within the prescribed term.
●	Regular premiums: refers to recurring premiums that are paid over the length of the policy at intervals specified within the policy, usually monthly.
●	Single premium: refers to a single lump sum paid upfront to purchase a long-term insurance policy. The vast majority of single premiums are primarily investment- and financial planning-related.

Abbreviations
ABI | Association of British Insurers
BBC | British Broadcasting Corporation
CPI | Consumer Price Index
FCA | Financial Conduct Authority
GIO | Guaranteed Increase Option (offered with LV=’s LifeTime+ whole-of-life plan)
IFA | Independent Financial Adviser
ISA | Individual Savings Account
L&G | Legal & General
LV= | Liverpool Victoria Friendly Society Limited
NMR | Nielsen Media Research. For further information, please contact nmr.communication@nielsenmedia.co.uk
RBS | Royal Bank of Scotland
RDR | Retail Distribution Review
RPI | Retail Prices Index
SPSSA4A | Statistical Package for the Social SciencesAviva for Advisers

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