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UK Term Assurance 2011 Product Image

UK Term Assurance 2011

  • ID: 1952312
  • September 2011
  • Region: United Kingdom, Great Britain
  • Datamonitor

FEATURED COMPANIES

  • Admiral Group plc
  • Bank of England
  • Bupa
  • CMS Energy Corporation
  • Hutchison 3G UK Limited
  • KPMG International
  • MORE

The UK term assurance market is in an increasingly tough market where financial conditions have not managed to strengthen enough to witness annual growth. Providers and distributors will need to adopt a dynamic approach to advertising and identify key prohibitors of the market. This report focuses on the strengths and weaknesses of the mortgage and non- mortgage related term assurance markets.

Scope of the report:

- Strategies to achieve growth in new business as RDR encourages advisors to gravitate towards the protection market.
- Identify new distribution opportunities as providers expand their levels of consumer engagement.
- Benchmark against peers within the UK term assurance market.
- Enhance knowledge of the macro economy and how it drives or inhibits the sale of term assurance.

Highlights:

- In line with a falling and now stagnant mortgage market, mortgage related term has continued to decline in new business premiums since 2008 where new business recorded £242.7m and declined further to £228.5m in 2010.

- Current RDR proposals state that advisor charging will not apply to pure protection products allowing IFAs to continue READ MORE >

FEATURED COMPANIES

  • Admiral Group plc
  • Bank of England
  • Bupa
  • CMS Energy Corporation
  • Hutchison 3G UK Limited
  • KPMG International
  • MORE

OVERVIEW
-Catalyst
-Summary

EXECUTIVE SUMMARY
-Term assurance dominates the UK protection market
-Retail Distribution Review regulations will impact positively on the protection market
-IFAs remain the dominant distribution channel for term assurance
-Technological innovations will help to grow the market

MARKET CONTEXT
-Term assurance dominates the UK protection market in terms of new business
?Mortgage related term assurance has suffered alongside a collapsed UK mortgage market
?Non-mortgage related term assurance increased in popularity under the uncertain economic climate
-The rider market is an essential component of term business
?Rider products allow a menu style format for protection
?The rider market has witnessed an overall decline in new business between 2006 and
-There are key drivers and inhibitors of the term assurance market
?The supply of term assurance continues to be weighed by uncertain economic conditions surrounding the market
?Demand for term assurance will be bolstered by consumers' willingness to spend
?Negative press discourages consumers from the protection market
-The economic environment is dissuading consumers from taking up protection
?Low interest rates create a disincentive for consumers to save, creating an opportunity for sales of term assurance

CONSUMER CONTEXT
-More than half of UK consumers do not have life insurance
?Age is a key determinant of term assurance holdings
?Life events trigger consumers to take out a life insurance policy
?Life insurance holding increases in line with income
?Consumers generally do not seek advice before taking out a life policy
?The channel of purchase varies significantly with age
?Intermediaries remain the dominant provider for term assurance
-Consumers believe they have no need for or cannot afford life insurance
?UK consumers desire protection products to offer a guaranteed payout
?A strong reputation is deemed highly important by consumers

COMPETITOR FOCUS
-The top 10 players account for 97% of the term assurance market
?Aviva writes £73.74m of new business premiums in the term assurance market
?Legal & General is the market leader in decreasing term assurance
-Providers of term assurance reveal strategic differences
?Providers are innovating their underwriting process for greater efficiency
?Providers are enhancing distribution partnerships, building stronger relationships within the industry
?Providers find new ways of engaging with consumers to promote the benefits of protection

DISTRIBUTION DYNAMICS
-Term distribution remains heavily weighted within the independent financial advisor channel
?IFAs' sales of non-mortgage related term assurance grew by 14% between 2006 and
?Regulatory issues are one factor driving changes in the distribution of term assurance
?Aggregator sites have the potential to open the market up to new customers

THE FUTURE TERM ASSURANCE MARKET
-The term market will remain flat throughout
?Datamonitor predicts that mortgage related term will witness steady growth over the next five years
?Non-mortgage related term business will decline in visibility as providers focus their efforts on other protection products
?Whole-of-life will continue to be popular among high net worth individuals
?Income protection will witness low but positive growth
?Critical illness will continue to have a strong presence in the rider market
?Long-term care will play an increasingly important role within the protection market
?Datamonitor predicts that IFAs will remain the dominant distribution channel over the next five years
?Single-tie distribution will continue to dominate sales of mortgage related term assurance
-Key macroeconomic drivers will be impacting the term market going forward
?Little growth in GDP is expected over the next five years to
?With the unemployment rate relatively high, it is hard to predict consumers' reaction to term assurance
?The base rate deters consumers from saving
?Forecasts for increasing mortgage lending will be a driver for term assurance going forward
-The post-RDR landscape highlights an opportunity for the protection market
?Regulatory issues may gravitate IFAs towards protection
?Technological innovations are a hindrance at present
-Providers need to be seen as partners in customers' life plans and should focus on a comprehensive service to shift emphasis away from price
?The emphasis must shift from price to quality in order to differentiate the product
?Payment of insurance needs to be quicker if it is to escape negative publicity

APPENDIX
-Data tables
-Definitions
?Critical illness
?Income protection
?Term assurance
?Decreasing term assurance
?Level term assurance
?Mortgage related term assurance
-ABI definitions of distribution channels
?Independent financial advisors (IFAs)
?Direct sales forces
?Single-tied agents
?Other
-Further reading
-Ask the analyst
-Disclaimer

TABLES
-Table: UK protection market: new business premiums (£m) APE, 2006–
-Table: Term assurance market: new business premiums (£m) APE, 2006–
-Table: Total regular premium life market: new business premiums (£m) adjusted for rider products, 2006–
-Table: Bank of England base rate, 2007 to July
-Table: Product penetration within key financial services products (%)
-Table: Penetration of life insurance holding according to age
-Table: Life insurance holding according to marital status
-Table: Why consumers do not hold a life policy
-Table: Top 10 providers of term assurance by new business (£m) and market share (%),
-Table: The top 10 players in the term assurance market: compound annual growth (%), 2006–
-Table: Non-mortgage related term assurance: new business premiums segmented by distribution channel (£m) annual premium equivalent, 2006–
-Table: Mortgage related term assurance: new business premiums segmented by distribution channel (£m), 2006–
-Table: Protection market: new business premiums (£m) annual premium equivalent, 2011f–15f
-Table: UK macroeconomic factors: 2011f–15f
-Table: Term assurance with rider market: new business premiums (£m) annual premium equivalent (APE), 2006–
-Table: Life insurance holding, split by income band
-Table: The channel of uptake for life insurance according to age band
-Table: Percentage of consumers who use the various channels of distribution
-Table: Reasons for not holding a life policy
-Table: Term assurance distribution
-Table: Mortgage related term segmented by distribution channel (£m) APE, 2011f–15f
-Table: Non-mortgage related term segmented by distribution channel (£m) APE, 2011f–15f

FIGURES
-Figure: Term assurance dominates the UK protection market
-Figure: Non-mortgage related term has taken away market share from mortgage related term
-Figure: Term assurance dominates the rider market
-Figure: Key drivers and inhibitors that affect supply and demand in the term assurance market
-Figure: Current accounts have the highest penetration rate of the financial services products
-Figure: The lower age bands are the least likely to own a life insurance product
-Figure: Married couples are more likely to own a life insurance product
-Figure: Higher income consumers are more likely to purchase life insurance
-Figure: Consumers are indifferent when it comes to researching life insurance
-Figure: Those in the "middle" age brackets prefer to take up their term assurance online and by telephone
-Figure: Intermediaries are the first port of call for many consumers wishing to take out term assurance
-Figure: Many consumers are unaware of the need for financial protection
-Figure: Affordability prevents most age groups from the uptake of term assurance
-Figure: A guaranteed lump sum is the feature that attracts most consumers to a protection product
-Figure: Providers should have an established reputation and come highly recommended
-Figure: Aviva accounts for 21% of the term assurance market
-Figure: Legal & General commands the top spot for decreasing term assurance
-Figure: The Aviva advertising campaign featuring Paul Whitehouse
-Figure: Savings related term assurance: new business premiums segmented by distribution channel (£m), 2006–
-Figure: Mortgage related term assurance: new business premiums segmented by distribution channel (£m), 2006–10
-Figure: The protection market is predicted to witness fairly flat growth
-Figure: IFAs will continue to be the dominant distribution channel for non-mortgage related term assurance
-Figure: Single-tie distribution will retain its market share of mortgage related term assurance



- Admiral Group plc
- Bank of England
- Bupa
- CMS Energy Corporation
- Hutchison 3G UK Limited
- KPMG International
- Royal KPN N.V.
- Schindler Holding Ltd.

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