Market Research Logo

Critical Illness Cover - UK - February 2016

Critical Illness Cover - UK - February 2016

“Sales of individual critical illness policies are once again in decline, and overall product penetration is low. Given the ongoing upward pressure on premiums and the already high cost of cover to the individual, turning the market’s fortunes around will not be an easy task. Providers need to find new ways to promote the product and engage the target audience, as well as designing more straightforward and affordable solutions.”

– Sarah Hitchcock, Senior Analyst – Financial Services

This report looks at the following issues:

Getting the price right
Helping people identify their own protection needs


OVERVIEW
What you need to know
Products covered in this report
EXECUTIVE SUMMARY
The market
Figure 1: Forecast of new individual critical illness premiums, at current prices – Fan chart, 2010-20
Key players
Figure 2: Estimated market shares of the top five providers of new individual critical illness cover, 2013 and 2014
The consumer
Figure 3: Ownership of protection insurance, by total sample, parents and mortgage holders, December 2015
Figure 4: Reasons for not having critical illness cover – top seven only, December 2015
Figure 5: Ability to manage financially if unable to work due to serious illness, December 2015
Figure 6: Factors which might prompt consideration of the product – top seven only, December 2015
Figure 7: Agreement with statements about critical illness insurance and the need for financial protection, by those with cover and those without, December 2015
Figure 8: Personal experience of suffering a serious or life-threatening illness, December 2015
Figure 9: Concerns about suffering a serious or life-threatening illness, December 2015
What we think
ISSUES & INSIGHTS
Getting the price right
Helping people identify their own protection needs
THE MARKET
What you need to know
Volume sales down by 13% in 2015
Mortgage term customers more likely to take out critical illness cover
90% of critical illness sales in 2015 were generated by advisers
First-time buyer numbers up, but affordability pressures remain
MMR yet to exert a positive influence over sales of protection insurance
Market size and forecast
Reduction in number of in-force policies
2015 witnesses further drop in new sales
Providers increase the cost of cover
Figure 10: Volume and value of new individual critical illness sales and average annual premium, 2010-15
Best-case scenario: steady premium growth over the next five years
Figure 11: Forecast of new individual critical illness premiums, at current prices – Fan chart, 2010-20
Volume sales: rapid slowdown in the rate of decline
Figure 12: Forecast of new individual critical illness policy sales – Fan chart, 2010-20
Significant pressures and challenges remain
Figure 13: Forecast of new individual critical illness premiums, at current and constant prices, 2010-20
Forecast methodology
Market segmentation
The vast majority of policies are sold as a rider benefit
Figure 14: New individual critical illness sales – rider benefit versus standalone policies, 2010-15
Mortgage term customers are now twice as likely to take out a critical illness rider as protection term
customers
Figure 15: Critical illness (CI) rider benefits as a proportion of new individual term assurance business, 2010-15
Channels to market
Decline in critical illness rider sales coming via advice channels…
Figure 16: Volume sales of new term insurance policies with individual critical illness riders, by channel, 2013-15
…although intermediaries still account for 90% of sales
Figure 17: Proportional distribution of new individual term critical illness riders, by channel, 2013-15
Decline of the bancassurance channel
Market drivers
Home purchase loans down 1% in 2015
Figure 18: Volume of house purchase loans, by type of borrower, 2006-15
Changing tenure patterns
Figure 19: UK housing stock, by tenure, 1993-2013
Living longer means there’s a greater chance of ill health in later years
Cancer is the top reason for claiming on a critical illness policy
Total cost of critical illness claims grew 6% in 2014
Figure 20: Summary of critical illness and total permanent disability (TPD) claims paid and proportion of declined claims, 2013
and 2014
Fall in proportion of declined claims due to non-disclosure and definition of claim not being met
Regulatory and legislative changes
Solvency II Directive comes into force
MMR has yet to make any discernible difference to protection sales
KEY PLAYERS
What you need to know
A heavily concentrated market
Insurers adopt diverging strategies
Paltry amount spent on above-the-line advertising
Market share
Larger players bucked the market trend in 2014
Figure 21: Volume sales and market shares of the top five providers of new individual critical illness cover, 2013 and 2014
Legal & General’s market-leading position under threat
Four of the top five grew sales volumes and market share in 2014 – bucking the overall market trend
Competitive strategies
Shifting market dynamics
Distribution developments
Product development
Advertising and marketing activity
Critical illness insurers make limited use of above-the-line advertising
Figure 22: Total above-the-line, online display and direct mail advertising expenditure on life protection products, 2011-15
Reasons for the lack of adspend
Nielsen Media Research coverage
THE CONSUMER
What you need to know
Only 8% of adult internet users are covered
‘It’s too dear’ say 40% of the non-insured
Developing a critical illness could put a household under serious financial strain
A change in fortune is most likely to prompt people to consider the product
Less than a third believe the onus is on them to ensure their own financial security
33% have experience of a critical illness – either directly or indirectly
Ownership of protection insurance
Only 8% of UK adults have critical illness cover
Figure 23: Ownership of protection insurance, December 2015
Take-up increases significantly among parents and mortgage holders
Figure 24: Ownership of protection insurance, by parents, mortgage holders and life insurance policyholders, December 2015
Broaden the product’s appeal to non-mortgage holders
Reasons for not having cover
It’s too expensive
Figure 25: Reasons for not having critical illness cover, December 2015
There’s no benefit to having it
A lack of trust remains a key barrier
Other reasons are less commonly expressed
Parents are less likely to say they can’t see the benefit of having cover
Figure 26: Reasons for not having critical illness cover, by parents and mortgage holders, December 2015
Potential financial impact of ill health
Figure 27: Ability to manage financially if unable to work due to serious illness, by all non-insured, parents and mortgage
holders, December 2015
35-44-year-olds are at most risk
Factors that might prompt purchase
25% of the non-insured rule out ever taking out cover
Figure 28: Factors that might prompt consideration of the product, December 2015
Improved affordability could increase consideration
Simplifying policies could aid consumer understanding
Promoting fixed premiums could also widen appeal
Lifestage events can provide the catalyst for buying cover
Attitudes toward the product
29% of the non-insured agree that individuals have a responsibility to protect their own future financial
security…
Figure 29: Agreement with statements about critical illness insurance and the need for financial protection, by those with cover
and those without, December 2015
…while 32% think it’s better to save your money than pay for insurance you may never need
Experience of serious and life-threatening illnesses
17% of UK adults have either suffered a serious illness themselves or has a partner who has…
Figure 30: Personal experience of or concerns about suffering a serious or life-threatening illness, by those with cover and
those without, December 2015
…which could make them potentially ineligible for critical illness insurance
APPENDIX
Data sources, abbreviations and supporting information
Product definitions
Intermediary market definitions
Abbreviations
Consumer research methodology
Market size and forecast
Total market value forecast – Best- and worst-case scenarios
Figure 31: Forecast of new individual critical illness premiums – Best- and worst-case scenarios, at current prices, 2015-20
Total market volume forecast – Best- and worst-case scenarios
Figure 32: Forecast of new individual critical illness policy sales – Best- and worst-case scenarios, 2015-20
Forecast methodology
Other relevant regulatory and legislative changes
Other recent regulatory and legislative developments impacting on the protection industry
Government initiatives to help homebuyers
RESEARCH METHODOLOGY
UK Research Methodology
Sampling and weighting
Face to Face Surveys
Definitions
Brand & Social Media Research
Trade research
Desk research
Statistical Forecasting
The Mintel fan chart

Download our eBook: How to Succeed Using Market Research

Learn how to effectively navigate the market research process to help guide your organization on the journey to success.

Download eBook

Share this report