UK Protection Insurance 2017: Critical Illness & Income Protection

  • ID: 4396693
  • Report
  • Region: United Kingdom, Great Britain
  • 58 pages
  • GlobalData
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FEATURED COMPANIES

  • AIG
  • Aviva
  • Friends Life
  • Legal & General
  • LV=
  • Royal London
  • MORE
UK Protection Insurance 2017: Critical Illness & Income Protection

Summary

Income Protection (IP) and Critical Illness insurance (CII) markets continued to grow in 2016. Their year-on-year percentage growth outstripped the total protection market, highlighting a growing market for illness- and injury-oriented products. However, together CII and IP still only account for less than 10% of the total protection market in terms of contracts and premiums.

The success of IP policies has been attributed to sales of short-term products where claims payouts are capped at duration of two years. The standalone CII market has doubled year on year but remains small, as the majority of CII contracts are sold as a rider product - mainly alongside a mortgage-related term policy.

Protection products remain complex, and are still sold and not bought, making advisors key to distribution. IP in particular is highly reliant on advisors, and this is not likely to change soon. Meanwhile, individuals are beginning to purchase CII independently online without advice, although advisors will remain key. To maintain market growth, providers and advisors must continue to build consumer engagement with these products.

Key findings include in this report -
  • IP grew to 119,459 in contracts and 10.8% in premiums from 2015 to 2016.
  • Standalone CII grew by 50.5% in contracts and £14.1m in premiums from 2015 to 2016. The with-rider CII market is around 16 times larger than the standalone market.
  • Legal & General dominates the CII market, holding a 25.4% market share in 2016. LV= and Friends Life dominate the IP market, with 27.3% and 23.1% shares respectively in 2016.
Total protection market has reached a period of stability in the number of contracts, following a significant reduction (primarily in non-mortgage-related policies) from 2013 to 2014 after the introduction of the Retail Distribution Review (RDR). From 2015 to 2016 the total number of contracts in the protection market remained flat, only falling by 0.1% to 1.8 Million. The market also saw a fall in premiums due to the RDR, but these have now entered a new normal, increasing only by 2.0% from 2015 to 2016.

The report "UK Protection Insurance 2017: Critical Illness & Income Protection" discusses income protection and critical illness insurance, looking at market size with regards to changes in contracts and premiums, in addition to claims. It highlights the barriers to consumer engagement, how products are distributed, and the main market players and their propositions. It provides five-year forecasts of market size in premiums to 2021, and discusses how the market is likely to change as healthcare technology is developed.

Companies mentioned in this report: Legal & General, Aviva, Vitality, Friends Life, Royal London, LV=, AIG.

Scope
  • Income protection grew by 7.4% to 119,459 in contracts and 10.8% to £48.3m in premiums from 2015 to 2016.
  • Standalone critical illness insurance grew by 50.5% to 28,751 in contracts and 47.3% to £14.1m in premiums from 2015 to 2016.
  • Legal & General dominates the critical illness insurance market, holding a 25.4% market share in 2016. LV= and Friends Life dominate the income protection market, with 27.3% and 23.1% shares respectively in 2016.
Reasons to buy
  • Understand the barriers of uptake for critical illness and income protection, and learn how to increase consumer engagement.
  • Explore how the distribution landscape is changing for these products.
  • Discover which providers lead the critical illness and income protection markets.
  • See how critical illness and income protection are forecast to grow over the next five years.
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Note: Product cover images may vary from those shown
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FEATURED COMPANIES

  • AIG
  • Aviva
  • Friends Life
  • Legal & General
  • LV=
  • Royal London
  • MORE
1. EXECUTIVE SUMMARY
1.1. Growing consumer engagement with IP and CII is vital
1.2. Key findings
1.3. Critical success factors
2. MARKET DYNAMICS
2.1. Introduction
2.2. The protection market has reached a new normal following the RDR
2.2.1. Contract levels for protection products reduced in the wake of the RDR
2.2.2. Protection is sold and not bought, making advisors key to the market
2.3. Contracts and premiums for IP and CII grew in 2016
2.3.1. IP and CII increased their share of the total protection market
2.3.2. The IP market continued to grow in 2016
2.3.3. The success of IP policies is due to products that cap payout duration at two years
2.3.4. Standalone CII has grown, but remains small compared to the total protection market
2.3.5. There are 16 times as many CII contracts sold as a with-rider product than standalone
2.3.6. Mortgage-related term customers are most likely to choose CII as a rider
2.3.7. Cross-selling CII as a rider product will be the easiest way to grow the CII market
2.3.8. The group protection market is shrinking
2.4. Consumer engagement with CII and IP is still relatively low
2.4.1. The 7 Families campaign helped raise awareness of protection products
2.4.2. The Building Resilient Households project looks to promote IP
2.4.3. There is confusion around the different types of protection products available
2.4.4. Only one in 10 people have IP in place
2.4.5. There is confusion around what employers and the government will provide
2.4.6. Individuals do not believe they will need protection products
2.4.7. Protection products are seen as a luxury purchase, and the application process is long
2.5. Over 90% of CII and IP claims received are paid
2.5.1. Cancer is the largest cost for critical illness insurers due to the high number of claims
2.5.2. The ABI is consulting whether stage one cancers should be excluded from full payment
2.5.3. 93.1% of CII claims submitted were paid in 2016
2.5.4. Mental illness is the highest claims cost for IP insurers
3. DISTRIBUTION DYNAMICS
3.1. RDR has changed the distribution landscape
3.1.1. The total protection market shows a decline in the restricted advice channel
3.1.2. IP as a product is highly reliant on advisors, and this is not likely to change soon
3.1.3. Individuals are purchasing CII independently without advice
3.2. Robo-advice has entered the life space, but is not expected for IP or CII soon
3.2.1. Life insurance products remain the focus for robo-advice tools
3.2.2. IP is too complicated to be sold directly or advised without a human
3.3. Insurers are developing their tools for advisors to aid distribution
3.3.1. Tools that help advisors sell protection products more efficiently are beneficial
3.3.2. Legal & General is testing how well advisors know its products
3.3.3. Legal & General helps advisors prevent policies being lost through its early warning system
3.3.4. LV=’s advisors can check likely underwriting outcomes using its new tool
3.3.5. Royal London has improved the flexibility of its online service for advisors
3.3.6. Royal London introduces e-signatures to speed up applications
4. COMPETITOR DYNAMICS
4.1. The injury and illness protection market is dominated by a few players
4.1.1. Legal & General dominates the critical illness market by number of contracts
4.1.2. LV= and Friends Life account for half of new IP sales
4.1.3. Innovation and technology is driving competition and will decide who wins
4.2. The CII market is trying to cover more conditions at a cheaper rate
4.2.1. Choosing how many conditions to cover is a cause for debate for critical illness insurers
4.2.2. AIG Life has launched a CII product that only covers for cancer, heart attack, and stroke
4.3. Legal & General leads the critical illness market
4.3.1. Legal & General’s CII has a range of benefits at no additional cost
4.3.2. Legal & General’s IP product has a range of options to reduce premiums
4.4. Friends Life is now part of the Aviva Group
4.4.1. Friends Life will move under the Aviva brand in October 2017
4.4.2. Aviva’s and Friends Life’s new critical illness product offers three tiers of cover
4.4.3. Aviva’s and Friends Life’s new IP policy allows advisors to flexibly design cover
4.5. LV= leads the IP market
4.5.1. LV= offers a specialist IP policy for doctors and surgeons
4.5.2. LV=’s critical illness product is only available as a rider alongside its term life insurance policy
4.5.3. LV= and Allianz are combining to form a joint venture in general insurance
4.5.4. LV= is looking to develop its rehabilitation services to aid the recovery of claimants
4.6. Royal London offers its Helping Hand support service to customers
4.6.1. Royal London’s IP customers can choose when payouts start and how long they last
4.6.2. Royal London’s CII covers 43 definitions and 14 additional conditions
4.6.3. Royal London has removed the age limit for its IP product
4.7. Vitality works to differentiate itself from other players
4.7.1. Vitality’s IP customers can benefit from rewards and discounts
4.7.2. Vitality’s serious illness payouts are based on severity, allowing it to cover more conditions
5. THE MARKET GOING FORWARD
5.1. The CII and IP markets are forecast to grow to 2021
5.1.1. The IP market is forecast to grow by 17.0% from 2016 to 2021
5.1.2. IP and CII policies can reduce Universal Credit payments, outweighing their value
5.1.3. The standalone critical illness market is forecast to grow by 11.5% from 2016 to 2021
5.1.4. Protection providers want government help to promote IP and CII
5.2. Policies are becoming personalized
5.2.1. Wearable healthcare technology is assessing individual risk
5.2.2. Genomic profiling could be used to assess risk in the future
5.2.3. Personalization could create an uninsurable underclass
5.2.4. Specialist policies for existing conditions could enter CII and IP
5.3. Providers want to actively help individuals manage their health
5.3.1. Providers could offer wearable technology that diagnoses and manages medical conditions
5.3.2. Facial analytics is being developed to detect early signs of disease
5.3.3. Aviva is investing in companies helping to protect and prevent against injury and illness
5.3.4. Rehabilitation and support services are helping customers get back to work
5.3.5. Wellbeing apps are being launched
5.3.6. Providers are launching digital healthcare and virtual GP services
6. APPENDIX
6.1. Abbreviations and acronyms
6.2. Bibliography
6.3. Further reading

List of Tables
Table 1: IP and CII within the total protection market, by contracts and premiums, 2011-16
Table 2: CII cover as a bolt-on to other protection products, 2016
Table 3: Distribution of IP contracts and premiums, split by channel, 2013-16
Table 4: Number of conditions covered by the top five CII providers in 2016
Table 5: Percentage payout of claims by severity and Vitality serious illness cover policy type

List of Figures
Figure 1: The non-mortgage-related market saw the biggest decline due to the RDR
Figure 2: Contracts and premiums for IP and CII grew in 2016
Figure 3: Premiums have performed better than contract numbers for IP
Figure 4: The standalone CII market doubled in size from 2015 to 2016
Figure 5: The number of contracts in the group market has fallen drastically since 2013
Figure 6: Cancer is the highest cost for critical illness insurers
Figure 7: Mental illness claims are the highest cost to IP insurers
Figure 8: The restricted advice channel has shrunk as a result of the RDR
Figure 9: Independent and restricted advice are the main channels of distribution for IP
Figure 10: All distribution channels for CII have grown, but the non-advised channel is gaining market share
Figure 11: Legal & General dominates the CII market, while LV= leads the way in IP
Figure 12: Vitality rewards customers who lead an active lifestyle
Figure 13: The IP market is forecast to grow by 17.0% to £56.5m from 2016 to 2021
Figure 14: The standalone CII market will grow 11.5% to £15.7m from 2016 to 2021
Note: Product cover images may vary from those shown
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  • Legal & General
  • Aviva
  • Vitality
  • Friends Life
  • Royal London
  • LV=
  • AIG
Note: Product cover images may vary from those shown
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