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Income Protection - UK - March 2019

OVERVIEW
What you need to know
EXECUTIVE SUMMARY
The market
Income protection sales are set to increase, but the market value remains steady
Figure 1: New individual (long-term) income protection sales and average premium, 2014-18
Value of new income protection contracts forecast to grow year on year
Figure 2: Forecast of new individual (long-term) income protection premiums – Fan chart, 2013-23
Independent advice accounts for 60% of new sales
Figure 3: Distribution of new individual (long-term) income protection premiums and contracts, by channel, 2014-18
Almost half have less than £5,000 saved
Figure 4: Level of savings and investments, excluding main home and pension savings, December 2018
Companies and brands
Aviva leads the way in the income protection market…
Figure 5: Estimated market shares of the top five providers of new individual income protection, based on volume sales, 2017
…and is also looking to target renters
ABI and Holloway Friendly are raising awareness of financial vulnerability
The consumer
Only 7% own an income protection product
Figure 6: Protection product ownership, December 2018
60% would struggle with a loss of income within six months
Figure 7: Expected impact of loss of income on financial stability, December 2018
41% expect to rely upon statutory sick pay
Figure 8: Awareness of employer sick pay policies, December 2018
Half take employers’ sickness policy into account when changing jobs
Figure 9: Attitudes towards employment sick pay policies, December 2018
Over half are interested in a faster application process
Figure 10: Attitudes towards income protection, December 2018
Similar levels of interest in life insurance and income protection
Figure 11: Interest in protection products, December 2018
52% are interested in extra medical health benefits
Figure 12: Interest in extra income protection benefits, December 2018
What we think
ISSUES AND INSIGHTS
Expand the reach of income protection to increase ownership
The facts
The implications
Educate consumers on the dangers of relying on an employer’s sickness policy
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Income protection sales increase, but average premiums are falling
Independent advice accounts for 60% of new sales
Almost half have less than £5,000 saved
Loans for first-time buyers and home movers decline in 2018
‘Good Work Plan’ will make employees more aware of their sickness policy
MARKET SIZE AND FORECAST
Number of new sales set to increase for the fourth year in a row
Figure 13: New individual (long-term) income protection sales and average premium, 2014-18
Strong performance for group income protection sales in 2018
Figure 14: Volume and value of new group (long-term) income protection sales, 2014-18
 MARKET FORECAST
Value of new income protection contracts forecast to grow year on year
Figure 15: Forecast of new individual (long-term) income protection premiums – Fan chart, 2013-23
Figure 16: Forecast of new individual (long-term) income protection premiums, 2013-23
Forecast methodology
CHANNELS TO MARKET
Independent advice remains the main route to market…
…but non-advised sales are on the rise
Figure 17: Distribution of new individual (long-term) income protection premiums and contracts, by channel, 2014-18
Bancassurance accounts for just under half of the non-advised market
Figure 18: Distribution of new individual (long-term) bancassurance income protection premiums, by channel, 2014-18
MARKET DRIVERS
Almost half have less than £5,000 saved
Figure 19: Level of savings and investments, excluding main home and pension savings, December 2018
Number of first-time buyers and home movers declined in 2018
Figure 20: Volume of house purchase loans, by type of borrower, 2012-18
Earnings growth overtakes inflation…
Figure 21: Average weekly earnings growth vs inflation, November 2008-November 2018
…but over 50% are concerned about the effect of Brexit on the cost of living
Figure 22: Attitudes towards the effect of Brexit on the cost of living, July 2016-November 2018
Self-employed workers are rapidly rising
Figure 23: Employment trends, by working status, 2000-18
One in five policies sold in 2018 were on a short-term basis
Figure 24: Income protection policies, by benefit term, 2018
REGULATORY AND LEGISLATIVE CHANGES
‘Good Work Plan’ will clarify employees’ sick pay policy
Mortgage-specific payments will not affect means-tested benefits
MPs discuss need for income protection
COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
Aviva is the largest provider in the income protection market…
…and is also looking to target renters
ABI and Holloway Friendly are raising awareness of financial vulnerability
MARKET SHARE
Aviva tops the list in 2017
Smaller providers are gaining ground
Figure 25: Estimated market shares of the top five providers of new individual income protection, based on volume sales, 2017
COMPANY PROFILES
Aviva
Recent performance and developments
LV=
Recent performance and developments
Legal & General
Recent performance and developments
Royal London
Recent performance and developments
The Exeter
Recent performance and developments
LAUNCH ACTIVITY AND INNOVATION
Zurich releases new policy with a lump-sum payment option
ABI and Holloway Friendly are raising awareness of financial vulnerability
Canada Life revamps its employee benefits
RedArc Nurses introduces a mental health app for insurers
Aventus is looking to speed up the insurance buying process
THE CONSUMER – WHAT YOU NEED TO KNOW
Just 7% own income protection
60% would struggle within six months with a loss of income
Half consider sickness policy when changing jobs
Over half are interested in a faster application process
Similar levels of interest in life insurance and income protection
52% are interested in extra medical health benefits
PROTECTION PRODUCT OWNERSHIP
Less than one in 10 own income protection
Income protection needs to adapt to reach a wider audience
Figure 26: Protection product ownership, December 2018
Dual-parent families are the most likely to have a policy
Figure 27: Ownership of income protection products, by lifestage, December 2018
EXPECTED IMPACT OF LOSS OF INCOME ON FINANCIAL STABILITY
Majority would struggle within 12 months
Figure 28: Expected impact of loss of income on financial stability, December 2018
A significant minority are overly optimistic about their financial resilience
Figure 29: Expected impact of loss of income on financial stability, by value of savings and investments, December 2018
Renters highly likely to be in trouble within six months
Figure 30: Expected impact of loss of income on financial stability, by housing situation, December 2018
AWARENESS OF EMPLOYER SICKNESS POLICIES
41% are reliant upon statutory sick pay
Figure 31: Awareness of employer sick pay policies, December 2018
Lack of awareness and ownership among those most in need
Figure 32: Awareness of employer sick pay policies, by ownership of income protection and accident or sickness cover, December 2018
ATTITUDES TOWARDS EMPLOYMENT SICKNESS POLICIES
50% consider sickness policy when changing jobs
Figure 33: Attitudes towards employment sick pay policies, December 2018
Greater understanding will lead to increased ownership
Figure 34: Agreement with the statement ‘I fully understand my employer’s sickness policy’, by ownership of income protection or accident or sickness cover, December 2018
ATTITUDES TOWARDS INCOME PROTECTION
A faster application process could convince over 50%
Case Study: Anorak is using Open Banking to provide life insurance
Figure 35: Attitudes towards income protection, December 2018
Awareness of income protection cover is still an issue
Figure 36: Response to the statement “I find income protection hard to understand”, by expected impact of loss of income on financial stability, December 2018
Self-employed more likely to identify need for cover
Figure 37: Response to the statement “I am confident that I do not need a protection policy’, by employment status, December 2018
INTEREST IN PROTECTION PRODUCTS
Little difference when it comes to interest in life insurance and income protection
Figure 38: Interest in protection products, December 2018
Less than one in five one-person households are interested in income protection
Figure 39: Interest in income protection, by lifestage, December 2018
INTEREST IN EXTRA INCOME PROTECTION BENEFITS
Over half would like extra medical health benefits
Support for mental health offers a point of differentiation
36% are interested in rewards for a healthy lifestyle
Figure 40: Interest in extra income protection benefits, December 2018
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
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
Figure 41: Forecast of new individual (long-term) income protection premiums, at current and constant prices, 2018-23
Forecast methodology

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