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UK Critical Illness and Income Protection Insurance 2008

Datamonitor
November 20, 2008
8 Pages - SKU: DFMN2026328

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Countries covered: United Kingdom

Introduction

This report provides a comprehensive analysis of the UK Critical Illness & Income Protection insurance markets providing market sizing, distribution and competitor information. The report also explores how providers can revive sales in these markets and provides the reader with forecasts of market size up to 2012.

Scope

Recommendations on how providers can revive growth in these sectors
Information on market size and forecasts of market size up to 2012
Competitor premium income and market share data

Highlights

Datamonitor would advocate providers introducing lite versions of the traditional CII product along the lines of Virgin's Cancer Cover. For instance providers could introduce separate policies aimed at the three most common types of CII claim: cancer, heart attack and strokes.

Premiums for CII written as a rider to term insurance have declined significantly since 2003. In 2003 premiums totaled £378m however this figure dropped off markedly in 2004 and 2005 and by 2007 premiums totaled £218m, representing a 42.3% fall. Despite an increase in 2006 new business premiums declined by a further 9.9% in 2007

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Overview: Catalyst; Summary; Executive Summary; There are various strategies that providers can adopt to revive sales of CII and IP; CII-lite policies would be a good way to reduce the cost of policies and capture consumers' interest; Specialist protection providers are growing their market share; Critical illness insurance is designed to pay out a lump sum on diagnosis of a critical illness while income protection insurance is designed to replace a policyholder's monthly income; Critical illness insurance pays out a lump sum on diagnosis of a critical illness; Income protection insurance is designed to provide a monthly income should the policyholder not be able to work through injury or ill health; New business premiums for IP held flat in 2007 while CII written as a rider product declined significantly; Income protection new business premiums have declined significantly between 2003 and 2007 while stand alone critical illness insurance premiums have remained flat; Premiums for CII written as a rider to term insurance have declined considerably since 2003; Providers are making moves to innovate their product sets; Fortis causes a stir in the market with Real Life Cover; LV= launches new Mortgage & Lifestyle Protection product; Table of Contents; Table of figures; Table of tables; Special feature: How to bring about a turnaround in the fortunes of IP and CII; Providers should consider introducing low cost CII-lite policies that are more aligned with the prices consumers are willing to pay; A key barrier to sales is the cost of CII; CII-lite policies would be a good way to reduce the cost of policies and capture consumers' interest; Providers should focus on pushing CII and IP business through direct players and aggregators; Specialist protection providers are growing their market share; Sales of life assurance via aggregators are currently low but nevertheless may increase in the future; More insurers should seek to speed up the underwriting of IP; Financial and medical underwriting can take a significant amount of time; Insurers should consider increasing financial underwriting limits; More insurers should implement tele-underwriting; Providers should focus on increasing public trust in IP; Many consumers and advisers have lost trust in IP; Zurich recorded a high percentage of paid CII claims; Many providers increased the proportion of CII claims paid in 2007; Insurers should organize an industry wide advertising campaign to promote protection products; The protection market is set to contract in 2009 before growing thereafter; A contracting mortgage market will mean new business premiums fall in 2009; Premiums will rise as the economy and mortgage market recover; The credit crunch may have positive and negative effects on CII and IP sales; Market focus; Critical illness insurance is designed to pay out a lump sum on diagnosis of a critical illness and prices are heavily influenced by consumers' age, gender, health and family medical history; Critical illness insurance pays out a lump sum on diagnosis of a critical illness; ABI members must cover the 23 ABI critical illness conditions in their policies; Underwriters are interested in applicant's age, gender, health and medical history; Income protection insurance is designed to replace a policyholder's monthly income should they be unable to work due to injury or ill-health; Income protection insurance is designed to provide a monthly income should the policyholder not be able to work through injury or ill health; The definition of incapacity is important when choosing an income protection policy; Parts of the state benefit system are due to change in October 2008 which may effect the IP market favourably; The state provides a range of benefits to help those who are sick or disabled; The government is replacing incapacity benefit with Employment Support Allowance in October 2008 which may reduce the number of new IP claims; New business premiums for IP and standalone CII held flat in 2007 while CII written as a rider product declined significantly; Total regular premium protection new business declined by a compound annual rate of 4.1% between 2003 and 2007; Income protection new business premiums have declined significantly between 2003 and 2007 while stand alone critical illness insurance premiums have remained flat; Premiums for CII written as a rider to term insurance have declined considerably since 2003; The number of new contracts for IP and stand alone CII increased significantly in 2007; Distribution dynamics; The IFA/Whole of market advisor channel dominates the distribution of IP and stand alone CII insurance however the non-intermediated channel is growing quickly in the IP market; The non-intermediated channel grew its share of income protection new business distribution significantly in 2007; Cardif Pinnacle acquires Direct Life & Pensions Service; LifeSearch has been active in the market; The IFA/whole of market advisor channel continued to dominate the distribution of stand alone CII in 2007 however it did lose market share; Competitive dynamics; Legal & General leads the market in accelerated CII products; Legal & General was the clear leader in accelerated CII in 2007; AIG was the largest provider of standalone CII; Friends Provident was the top IP insurer in 2007; Providers are making moves to innovate their product sets; Friends Provident has made a number of changes to its proposition to enable faster processing of applications; Friends Provident introduced tele-underwriting for IP applications; Friends Provident increased its financial underwriting limits for life and CII; Fortis has shaken up the market with an innovative lower cost product combining a number of products into one policy; Fortis causes a stir in the market with Real Life Cover; Royal Liver is going to roll out a similar product to Real Life Cover in conjunction with LifeSearch; Legal & General has also taken steps to speed up the application process and has signed several new partnerships; Legal & General drops the need for disclosure of changes between acceptance and start of life policies; Legal & General takes steps to make financial underwriting easier; Legal & General signs two new distribution agreements; LV= has launched a new product called Mortgage & Lifestyle Protection which is an interesting combination of MPPI and IP; LV= reduces flexible rates; LV= launches new Mortgage & Lifestyle Protection product; Aviva has added several benefits to its CII policies and launched a new IP proposition; Aviva adds several benefits to its CII policies retrospectively; Aviva Healthcare launches Income Protection Solutions
Appendix: Definitions; Products; Income Protection; Critical Illness; ABI definitions of distribution channels; Independent Financial Advisors (IFAs); Direct sales forces; Tied agents; Multi-tied agents; Bancassurance; Direct marketing; Telesales; Other; Further reading; Ask the analyst; Datamonitor consulting; Disclaimer
List of Tables: Table 1: Claims paid and claims declined data, selected providers, 2007; Table 2: Forecast total regular premium life market, new business premiums, £m; Table 3: Total regular premium life market, new business premiums, £m; Table 4: Total regular premium life market adjusted for rider products, new business premiums, £m; Table 5: Total regular premium life market, number of new contracts; Table 6: Income protection distribution, 2003-07, (£m APE); Table 7: Stand alone critical illness insurance distribution, 2003-07 (£m APE); Table 8: Accelerated CII new business premiums, 2006-07 (£000); Table 9: Standalone CII new business premiums, 2006-07 (£000); Table 10: Income protection new business premiums by competitor, 2006-07 (£000)
List of Figures: Figure 1: Zurich paid the highest proportion of CII claims of the four providers; Figure 2: Regular premium life new business premiums are forecast to contract in 2009 before growing between 2010 and 2012; Figure 3: Regular premium protection new business has fallen since 2003 however premiums picked up in 2007; Figure 4: New business premiums for income protection insurance have declined between 2003 and 2007 while stand alone CII premiums have held fairly flat; Figure 5: New business premiums for CII written as a rider to term insurance outweigh stand alone CII premiums; Figure 6: The number of new contracts for IP insurance and stand alone CII increased significantly in 2007; Figure 7: The non-intermediated channel grew its share of income protection new business distribution significantly in 2007; Figure 8: The single tie excluding bancassurance channel increased its market share of distribution of stand alone CII in 2007

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UK Critical Illness and Income Protection Insurance 2008

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