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Eye on Intermediaries - Life Protection - UK - October 2009

IFAs are looking for simplicity, not a raft of additional features. 45% of intermediaries say that stripped-down underwriting processes would make it easier to sell to clients, and almost as many want applications to be streamlined.

  • Just as consumers prefer to buy life cover face-to-face, so too do intermediaries prefer to be able to learn about new policies in person. Printed marketing material - once the mainstay of provider/IFA communication - has been swapped for face-to-face meetings and online resources.
  • IFAs say that the recession is the main barrier to increasing sales but, encouragingly, there seems to be a groundswell of optimism among intermediaries when compared to the start of the year.
  • The front-of-mind issue is the potential impact of the Retail Distribution Review. Many fear that it will be extended to cover the protection market, leading to a possible increase in the cost of compliance and training.
  • Even if the RDR isn't extended, it will still have a major impact on the sector. Some forecast an influx of former investment specialists into the protection market, as they look to avoid the new regulatory restrictions.
  • It's been a tough market for life sales, largely as a result of the housing crash. Frustratingly for advisers, the one booming area - over-50s plans - is largely unintermediated.

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Table of contents

  1. Issues in the Market

    • Key issues
      • Key issues
        • Definition
          • Broad types
            • Investment or protection
              • Figure 1: The categorisation of life protection policies, 2009
            • Abbreviations
            • Future Opportunities

              • Life coaching and financial management
                • ‘Re-intermediation’ to champion consumers and cure financial illiteracy
                  • Social networking
                  • Market in Brief

                    • The recession and the credit crunch take their toll…
                      • Figure 2: Premiums of all types of life policy, 2006-09
                    • … but IFAs cope better than other intermediaries
                        • Figure 3: All life policy gross premiums, by distribution channel, 2006-09
                      • IFA confidence is looking up
                        • Intermediaries also face long-term problems…
                          • … and are looking for simplification and streamlining
                            • The growing costs of operating in the intermediary market
                              • Figure 4: Total number of directly authoriised retail intermediary firms, Jan 2006-Jun 2009
                              • Figure 5: The Top protection financial advisers in the UK, based on protection turnover, 2007/08
                            • Will the RDR radically change the protection market?
                            • Internal Market Environment

                              • Key points
                                • The life assurance protection gap remains £2.3 trillion
                                  • Many are apathetic and financially illiterate…
                                    • … leading them to overestimate the cost of cover
                                      • A need to rebuild trust...
                                        • Figure 6: Agreement with trust statements about financial advisers, December 2008
                                      • … and show value for money
                                        • Figure 7: Consumer happiness with financial advisers’ fees, December 2008
                                      • Implications
                                        • The industry responds to boost engagement, raise trust and...
                                          • … improve operationally
                                            • Figure 8: Financial services firms complained about, by sector, 2006/07-2008/09
                                          • IFAs under pressure from rising regulatory costs…
                                            • … and indemnity insurance costs compound the problem
                                              • Growing role of technology
                                                • Leading to more e-contacts
                                                  • Tele-underwriting helps the IFA and the consumer
                                                    • ABI and IFAs at loggerheads over acceptance data tables
                                                      • From life protection to life planning
                                                        • Implications
                                                          • IHT changes will hit sales of unit-linked whole-of-life policies
                                                            • Life insurance premiums get cheaper in the recession…
                                                              • Figure 9: Annual rate of growth in the life insurance and all consumer spending price deflators, 2000 Q1-2009 Q1
                                                            • … but could rates be pushed up by Solvency II legislation?
                                                              • Genetic testing moratorium has been extended to 2014
                                                                • Supermarkets a growing threat to IFAs
                                                                • Broader Market Environment

                                                                  • Key points
                                                                    • The crunch increases the need for risk management
                                                                      • The crunch will hit new business…
                                                                        • …as will the housing slump
                                                                          • Figure 10: Residential housing transactions, 2005-09
                                                                        • With-profits under pressure
                                                                          • Figure 11: Net investments, by insurance company long-term funds, Q1 2004-Q1 2009
                                                                        • Improving longevity good news for the life industry
                                                                          • Figure 12: Cohort expected age of death+ at age 50, 60 and 70, 1981-2051
                                                                        • Population trends will impact on demand for life policies
                                                                          • Figure 13: UK population, by age bracket, 2006-31
                                                                        • Implications
                                                                        • Regulatory Developments

                                                                          • Key points
                                                                              • Figure 14: Summary of the structure of regulation on the life protection industry, 2009
                                                                            • Split regulation
                                                                              • Over-50s plans benefits
                                                                                • Price disclosure for pure protection contracts
                                                                                  • RDR to put a spanner in the works?
                                                                                    • Advice split into four
                                                                                      • From commission to the adviser charge
                                                                                        • Raising professional standards
                                                                                          • What impact will RDR have on life protection?
                                                                                            • Implications
                                                                                              • Will “read across” result?
                                                                                                • IFAs in the dark
                                                                                                  • Mixed Commission on the rise
                                                                                                    • New capital adequacy requirements
                                                                                                      • Treating Customers Fairly initiative
                                                                                                        • Industry reaction to TCF
                                                                                                          • Thorensen Review – Money Guidance Service
                                                                                                            • Impact on market for financial advice
                                                                                                            • Consumer Competitive Context

                                                                                                              • Key points
                                                                                                                • Intermediaries take second place to friends and family…
                                                                                                                    • Figure 15: Sources of financial advice used, January 2009
                                                                                                                  • … but IFAs appeal to the affluent
                                                                                                                      • Figure 16: The main sources of financial advice used, by socio-economic group and household income, January 2009
                                                                                                                  • Strengths and Weaknesses in the Market

                                                                                                                      • Figure 17: Life protection products – strengths and weaknesses in the market, 2009
                                                                                                                    • Strengths
                                                                                                                      • Weaknesses
                                                                                                                      • Who’s Innovating?

                                                                                                                        • Key points
                                                                                                                          • Aviva looks at postcode pricing for life insurance….
                                                                                                                            • … and offers free life cover to new parents
                                                                                                                              • IFA Life starts matchmaking…
                                                                                                                                • L&G “revolutionises” client management…
                                                                                                                                  • … and tries to help advisers convert more leads into sales
                                                                                                                                    • L&G drops doctors medical report for under-50s
                                                                                                                                      • Zurich simplifies the process
                                                                                                                                        • LifeSearch one-stop policy
                                                                                                                                          • Aviva’s Future Adviser Programme
                                                                                                                                            • Friends Provident Selling Techniques Toolkit
                                                                                                                                              • Instant acceptance life and critical illness cover
                                                                                                                                              • Trade Perspective

                                                                                                                                                  • Intermediaries must build trust and awareness…
                                                                                                                                                    • And plan for RDR and get qualified
                                                                                                                                                      • Impact of RDR depends on read over…
                                                                                                                                                        • … though some see fewer, but more professional intermediaries…
                                                                                                                                                          • … with IFAs needing help from the life providers
                                                                                                                                                            • Better prospects for intermediaries in the future…
                                                                                                                                                              • … but don’t expect significant new business volumes
                                                                                                                                                                • More product development
                                                                                                                                                                  • Professionalism and added value the key
                                                                                                                                                                  • Intermediary Marketplace

                                                                                                                                                                    • Key points
                                                                                                                                                                      • Current structure of the advice market
                                                                                                                                                                        • Figure 18: Overview of the structure of UK intermediary market, 2009
                                                                                                                                                                        • Figure 19: The structure of the UK intermediary market, June 2009
                                                                                                                                                                      • Fewer intermediaries
                                                                                                                                                                        • Figure 20: Total number of directly authoriised retail intermediary firms, June 2006-July 2009
                                                                                                                                                                      • Financial advisers come through the recession well
                                                                                                                                                                        • Figure 21: Number of directly authorised retail intermediary firms, by sector (primary category), 2006-09
                                                                                                                                                                      • Strong trend towards ARs and non-specialisation
                                                                                                                                                                        • Figure 22: The growth in the number of intermediaries, by type, July 2006-June 2009
                                                                                                                                                                      • The next five years will be difficult…
                                                                                                                                                                        • … but not all agree
                                                                                                                                                                        • Distribution Overview

                                                                                                                                                                          • Key points
                                                                                                                                                                            • Three main types of intermediary
                                                                                                                                                                              • Intermediaries generate the lion’s share of single life, regular premium business…
                                                                                                                                                                                • Figure 23: New individual regular premium business, by distribution channel, 2006-09
                                                                                                                                                                              • … but are less important when looking at the overall life market
                                                                                                                                                                                • Figure 24: All life policy premiums, by distribution channel, 2006-09
                                                                                                                                                                              • WOM especially important for whole life linked and term non-linked policies
                                                                                                                                                                                • Figure 25: New individual, regular premium business, by type of policy and distribution channel, 2008
                                                                                                                                                                              • IFAs dominate group life but struggle for single premium and collective life business
                                                                                                                                                                                • Figure 26: New collective life and single premium business, by type of policy and distribution channel, 2008
                                                                                                                                                                              • Life offices look to generate more business on a non-advised basis
                                                                                                                                                                              • Market Size and Trends

                                                                                                                                                                                • Key points
                                                                                                                                                                                  • The whole market declines
                                                                                                                                                                                    • Figure 27: Premiums of all types of life policy+, 2006-09
                                                                                                                                                                                    • Figure 28: Gross premiums of all types of life policy, by type of policy, 2006-09
                                                                                                                                                                                  • Single life, regular premium protection sales decline
                                                                                                                                                                                    • Figure 29: Premiums and policy sales of new single life, regular premium life policies, 2002-09
                                                                                                                                                                                  • Term insurance dominates the individual, regular premium sector...
                                                                                                                                                                                    • Figure 30: Premiums of new single life, regular premium life policies, by type of policy, 2005-09
                                                                                                                                                                                  • But whole-of-life is the star performer led by over 50 policies
                                                                                                                                                                                    • Figure 31: New policy sales of single life, regular premium life policies, by type of policy, 2005-09
                                                                                                                                                                                  • Problems in the mortgage market hold sales down
                                                                                                                                                                                    • Figure 32: The Value of new premium for term assurance and endownment policies, by type, 2006-09
                                                                                                                                                                                    • Figure 33: The number of new term assurance policies sold, by type, 2006-09
                                                                                                                                                                                  • Forecast
                                                                                                                                                                                    • Term premiums to remain subdued
                                                                                                                                                                                      • Figure 34: Life insurance premium income, 2005-14
                                                                                                                                                                                    • Factors used in the forecast
                                                                                                                                                                                    • Intermediary Performance

                                                                                                                                                                                      • Key points
                                                                                                                                                                                        • IFAs generate over £500 million of life sales…
                                                                                                                                                                                          • Figure 35: IFA-generated new life assurance premiuims, 2006-09
                                                                                                                                                                                        • Group life and term sales are the bedrock of the IFA market
                                                                                                                                                                                          • Figure 36: Breakdown of IFA-generated life premiums, by type, 2006-09
                                                                                                                                                                                        • It’s a rocky ride for the single and multi-tie intermediary
                                                                                                                                                                                          • Figure 37: Singe and multi-tie-generated new life assurance premiuims, 2006-09
                                                                                                                                                                                        • Regular, individual term policies now the main business for a tied agent
                                                                                                                                                                                          • Figure 38: The breakdown of life premiums generated by single tie/multi-tie agents, 2006-09
                                                                                                                                                                                        • Direct, non-intermediated sales face the same rollercoaster as tied agents
                                                                                                                                                                                          • Figure 39: Non-intermediated-generated new life assurance premiuims, 2006-09
                                                                                                                                                                                        • Regular premium individual whole life policies set to become the most important for the direct channels
                                                                                                                                                                                          • Figure 40: The breakdown of life premiums generated, by non-intermediated channels, 2006-09
                                                                                                                                                                                        • Bancassurance sales pulled down by loss of collective life business
                                                                                                                                                                                          • Figure 41: Bancassurance-generated new life assurance premiuims, 2006-09
                                                                                                                                                                                        • Guaranteed-acceptance plans of growing importance
                                                                                                                                                                                          • Figure 42: The breakdown of life premiums generated by bancassurance channels, 2006-09
                                                                                                                                                                                      • Key Players

                                                                                                                                                                                        • Key points
                                                                                                                                                                                          • Sesame and Openwork are the largest protection IFA firms by turnover
                                                                                                                                                                                            • Figure 43: The Top protection financial advisers in the UK, based on relevant turnover, 2007/08
                                                                                                                                                                                          • About the top players
                                                                                                                                                                                            • Sesame
                                                                                                                                                                                              • Openwork
                                                                                                                                                                                                • Intrinsic Financial Services
                                                                                                                                                                                                  • The Tenet Group
                                                                                                                                                                                                    • Personal Touch Financial Services
                                                                                                                                                                                                      • The Money Portal
                                                                                                                                                                                                      • Brand Communication and Promotion

                                                                                                                                                                                                        • Key points
                                                                                                                                                                                                          • Life protection intermediaries spend little on advertising
                                                                                                                                                                                                            • Figure 44: Advertising expenditure, by financial intermediaries that do or may sell life protection, by sector, 2006-08
                                                                                                                                                                                                          • Press advertising the most important
                                                                                                                                                                                                            • Figure 45: Proportional distribution of life protection intermediary advertising expenditure, by media type, 2008
                                                                                                                                                                                                          • But intermediaries also benefit from insurer advertising
                                                                                                                                                                                                            • Figure 46: Advertising expenditure on life protection of direct benefit to advisers/intermediaries, 2006-08
                                                                                                                                                                                                          • Lead generation of prime importance
                                                                                                                                                                                                          • The IFA: Client Sales

                                                                                                                                                                                                            • Key points
                                                                                                                                                                                                              • It’s the economy, stupid!
                                                                                                                                                                                                                • Figure 47: The main barriers when it comes to trying to sell protection and life insurance products to clients, July 2009
                                                                                                                                                                                                              • Implications and opportunities
                                                                                                                                                                                                                • But lack of trust and financial illiteracy are important long-term problems…
                                                                                                                                                                                                                  • Implications and opportunities
                                                                                                                                                                                                                    • … along with insurers’ direct sale activities
                                                                                                                                                                                                                      • Implications and opportunities
                                                                                                                                                                                                                      • The IFA: Provider Support

                                                                                                                                                                                                                        • Key points
                                                                                                                                                                                                                          • Simplification rather than complexity needed from providers
                                                                                                                                                                                                                              • Figure 48: What insurers could do to make it easier for IFAs to sell protection products and life insurance to their clients, July 2009
                                                                                                                                                                                                                            • IFAs get their wish for awareness marketing
                                                                                                                                                                                                                              • Get proactive to keep the IFA informed
                                                                                                                                                                                                                                  • Figure 49: How IFAs prefer to keep up to date with developments in the life and protection markets, July 2009
                                                                                                                                                                                                                              • The IFA: Future Intentions

                                                                                                                                                                                                                                • Key points
                                                                                                                                                                                                                                  • If things are not exactly rosy at the moment...
                                                                                                                                                                                                                                    • Figure 50: How confident are IFAs in the future, compared to six months ago, July 2009
                                                                                                                                                                                                                                  • “Things can only get better”
                                                                                                                                                                                                                                    • Figure 51: How confident IFAs are in the future of the financial services industry, January 2009, July 2009 compared to six months ago, July 2009
                                                                                                                                                                                                                                  • And for sure, things are not looking any worse
                                                                                                                                                                                                                                    • More IFAs are planning expansion rather than contraction
                                                                                                                                                                                                                                      • Figure 52: IFA future plans over the next 12 months, January 2009 and July 2009
                                                                                                                                                                                                                                    • But more are also planning to leave the industry
                                                                                                                                                                                                                                      • Will RDR force a shift towards fees?
                                                                                                                                                                                                                                        • Looking after the current client base
                                                                                                                                                                                                                                        • The IFA: Opinions on Legislation

                                                                                                                                                                                                                                          • Key points
                                                                                                                                                                                                                                            • Almost 40% have a negative view of the Retail Distribution Review
                                                                                                                                                                                                                                              • Figure 53: Opinions on the impact of the RDR, TCF and Thorensen Review on IFA business, July 2009
                                                                                                                                                                                                                                            • But opinion is shifting towards the green
                                                                                                                                                                                                                                              • Figure 54: Opinions on the impact of the RDR, January 2009 and July 2009
                                                                                                                                                                                                                                            • TCF seen as largely benign
                                                                                                                                                                                                                                              • Most IFAs don’t get the point of the Thorensen Review
                                                                                                                                                                                                                                              • Appendix – Intermediary Marketplace

                                                                                                                                                                                                                                                  • Figure 55: The number of general insurance intermediary firms, by type, July 2006-June 2009
                                                                                                                                                                                                                                                  • Figure 56: The number of financial advice intermediary firms, by type, July 2006-June 2009
                                                                                                                                                                                                                                                  • Figure 57: The number of mortgage intermediary firms, by type, July 2006-June 2009
                                                                                                                                                                                                                                              • Appendix – Market Size and Trends

                                                                                                                                                                                                                                                  • Figure 58: The whole-of-life assurance market, 2006-09
                                                                                                                                                                                                                                              • Appendix – Segmentation

                                                                                                                                                                                                                                                  • Figure 59: New life premiums generated, by IFAs/WoM, 2006-09
                                                                                                                                                                                                                                                  • Figure 60: New life premiums generated, by single and multi-tie agents, 2006-09
                                                                                                                                                                                                                                                  • Figure 61: New life premiums generated, by direct, non-intermediated channels, 2006-09
                                                                                                                                                                                                                                                  • Figure 62: New life premiums generated, by bancassurance channels, 2006-09

                                                                                                                                                                                                                                              Companies Covered

                                                                                                                                                                                                                                              • Aegon UK
                                                                                                                                                                                                                                              • Alexander Forbes
                                                                                                                                                                                                                                              • Association of British Insurers
                                                                                                                                                                                                                                              • Association of Independent Financial Advisers
                                                                                                                                                                                                                                              • Aviva Plc
                                                                                                                                                                                                                                              • Barclays Bank plc
                                                                                                                                                                                                                                              • Financial Ombudsman Service
                                                                                                                                                                                                                                              • Financial Services Authority (The)
                                                                                                                                                                                                                                              • Friends Provident plc
                                                                                                                                                                                                                                              • Government Actuary's Department (GAD)
                                                                                                                                                                                                                                              • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                                                                                                              • HSBC Private Bank (UK) Limited
                                                                                                                                                                                                                                              • Misys Plc
                                                                                                                                                                                                                                              • Money Portal Limited
                                                                                                                                                                                                                                              • Norwich Union
                                                                                                                                                                                                                                              • Office for National Statistics
                                                                                                                                                                                                                                              • Royal Bank of Scotland Group plc
                                                                                                                                                                                                                                              • Royal London Group
                                                                                                                                                                                                                                              • Simply Biz plc
                                                                                                                                                                                                                                              • Tenet Group Ltd
                                                                                                                                                                                                                                              • Zurich Financial Services

                                                                                                                                                                                                                                              Eye on Intermediaries - Life Protection - UK - October 2009

                                                                                                                                                                                                                                              £1,995.00 (Excl.Tax)