Income Protection Insurance - UK - January 2009
Despite the fact that income protection is widely regarded as the cornerstone of protection needs, the last few years have seen these policies vastly outsold by ‘rival’ products such as mortgage payment protection insurance and critical illness cover. A lack of awareness among consumers and financial advisers, perceived product complexities, an onerous and lengthy underwriting process, and a lack of consumer trust in the protection industry, have all been cited as key reasons behind income protection’s continuing weak sales performance.
The last 12 months, however, have witnessed clear signs that the market may be set for a revival. Indeed, the long-term decline in individual income protection sales was finally halted during 2008, while a number of providers have introduced innovative new products which have started to address some of the product’s perceived problems. While many challenges certainly lay ahead, there does seem to be a mood of cautious optimism within the industry. There are even suggestions that the time is now right for this ‘Cinderella’ product to finally go to the ‘Ball’.
This report provides an assessment of recent trends within this sector. It analyses market data, considers the prospects for future growth and reports industry views on a range of salient issues. In addition, it provides analysis of Mintel’s independently-commissioned consumer research which identifies the proportion of adults who own income protection, considers attitudes towards a number of protection-related issues and assesses the need for income protection across the consumer base.
IMPORTANT: A number of mainstream, general insurance companies, offer what they call ‘income protection’, but which is actually short-term, non-mortgage related, accident, sickness and unemployment insurance (ASU), also referred to as payment protection insurance. The scope of this report does not extend to these products. The principal difference between ASU and long-term income protection as covered in this report is that first, ASU covers unemployment, and secondly, ASU will only pay benefits for a period of 1-2 years. Furthermore, unlike ASU, the domain of income protection tends to be more associated with specialist protection providers as well as the large life and pension companies.
Some key report findings
Mintel’s research found that around one in 12 adults currently hold an income protection policy.
The likelihood of someone owning income protection was found to increase markedly if they already hold another type of protection product.
A significant minority of consumers have a positive predisposition to protection products – three in ten said that such policies give them peace of mind, while one in six agreed that the extra financial security is worth paying for.
However, a quarter of consumers did say that they prefer to save money rather than pay insurance premiums.
In addition, a large minority of the sample questioned the integrity of the protection industry, with more than a fifth agreeing that insurers often try to avoid paying out.
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