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Life and Protection - Intermediary Focus - UK - November 2012

“The protection market from an intermediary’s perspective looks somewhat daunting over the next year. The large number of regulatory changes and the prevailing economic conditions mean that the months ahead will be a challenge. However, there is no reason that intermediaries cannot continue to prosper despite these challenges. By addressing changes in customer behaviour such as a desire to embrace technology and increasing efforts to raise awareness of protection products, intermediaries can prosper during this period of change within the industry.”

– Stephanie Seenan – Financial Services Analyst

Some questions answered in this report include:

  • How will the protection market fare post-RDR?
  • How can the industry overcome the difficulties around consumer awareness and understanding?
  • How can the industry keep up with technologically advanced consumers?
  • How can intermediaries justify their position in the protection market?
  • How will the protection market look for intermediaries as we enter 2013?

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The market
            • Distribution of protection products is IFA-dependent
              • Term assurance distribution
                • Figure 1: Total new premiums for individual regular-premium term assurance policies written, by distribution channel and policy type, 2007-H1 2012
              • Critical illness distribution
                • Figure 2: Distribution of new individual CI rider benefit premiums, by channel, 2008-H1 2012
              • Income protection distribution
                • Figure 3: Distribution of new individual IP premiums, by distribution channel, 2009-H1 2012
              • Market factors
                • Protection product payout rates can offer the industry a boost
                  • Uncertainty in the housing market worrying for protection sales
                    • FSA stats show 6% drop in number of advisers
                      • Overview of regulation changes
                        • The RDR
                          • Figure 4: RDR business impact over the next 12 months, August 2012
                        • Solvency II
                          • Gender-neutral pricing
                            • Companies, products and innovations
                              • Product and service innovations
                                • The IFA
                                  • Barriers to generating new life and protection business
                                    • Figure 5: Barriers to life and protection sales, August 2012
                                  • Changes in client behaviour
                                    • Figure 6: Changes in client behaviour, August 2012
                                  • Provider support
                                    • Figure 7: Ways to improve life and protection sales to clients, August 2012
                                  • What we think
                                  • Issues in the Market

                                      • How will the protection market fare post-RDR?
                                        • How can the industry overcome the difficulties around consumer awareness and understanding?
                                          • How can the industry keep up with technologically advanced consumers?
                                            • How can intermediaries justify their position in the protection market?
                                              • How will the protection market look for intermediaries as we enter 2013?
                                              • Trend Application

                                                • Changes in lifestyle require flexibility in protection cover
                                                  • Youngsters can learn from their parents and ensure they are protected
                                                    • Releasing seniors’ savings to protect the young
                                                    • Market Drivers

                                                      • Key points
                                                        • Protection gaps have to be addressed as welfare support decreases
                                                          • Figure 8: Income protection gap (measured by annual benefit), 2005-10
                                                        • Target market size
                                                          • Figure 9: Ownership of life protection and health insurance products, March 2012
                                                        • Fears about facing mortality put people off
                                                          • Treasury group recommends launch of simple life protection product
                                                            • Disclosing payout rates can build consumer confidence
                                                              • GDP figures provide hope for 2013
                                                                • Figure 10: UK GDP growth – percentage change, latest quarter on previous quarter, Q1 2009-Q3 2012
                                                              • Mortgage market fluctuations impact protection sales
                                                                • Figure 11: Residential housing transactions (seasonally adjusted), Q1 2007-Q2 2012
                                                              • First-time buyers provide a boost for pure protection sales in Q1 2012
                                                                • Increased longevity means lower protection premiums
                                                                  • Figure 12: Cohort life expectancy at age 60, by gender, 1981-2060
                                                                • Major insurers make changes to improve protection offerings
                                                                  • Attempts to boost income protection take-up
                                                                  • Regulatory Environment

                                                                    • Key points
                                                                      • RDR will pose challenges for advisers and the protection market
                                                                        • FSA reports 6% drop in number of advisers prior to RDR
                                                                          • Complaints about IFAs continue to fall
                                                                            • Figure 13: Financial services firms complained about, by sector, 2007/08-2011/12
                                                                          • Taxation of protection business
                                                                            • Gender-neutral pricing could push up premiums across the board
                                                                              • Mortgage Market Review could reduce mortgage activity
                                                                                • Solvency II could also contribute to higher premiums
                                                                                  • Capital adequacy rules postponed
                                                                                  • SWOT Analysis

                                                                                      • Figure 14: SWOT Analysis
                                                                                  • Who’s Innovating?

                                                                                    • Key points
                                                                                      • PruProtect offering wealth manager range prior to RDR
                                                                                        • Zurich launches revamped microsite
                                                                                          • LV= launches budget IP offering
                                                                                            • Exeter Family Friendly launches new website
                                                                                              • Life quote protection app launched by Openwork
                                                                                                • Advisers plan new financial educational charity
                                                                                                • Protection Market Size

                                                                                                  • Key points
                                                                                                    • Term assurance
                                                                                                      • Term assurance market falls back slightly in 2011
                                                                                                        • Figure 15: Volume and value of new individual regular-premium term assurance policy sales, 2007-H1 2012
                                                                                                      • Mortgage-related new premium term assurance sales fall back in 2011
                                                                                                        • Figure 16: Volume and value of new individual regular-premium term assurance policy sales, by policy type, 2007-H1 2012
                                                                                                      • Critical illness
                                                                                                        • Growth in the CI market is encouraging
                                                                                                          • Figure 17: New individual CI sales, by volume and value, 2008-H1 2012
                                                                                                        • Standalone CI sales account for a small proportion of new business
                                                                                                          • Figure 18: New individual CI sales, by type, by volume and value, 2008-H1 2012
                                                                                                        • Term assurance is the largest selling partner of CI policy sales
                                                                                                          • Figure 19: New individual CI rider benefit sales, by volume and value and type of insurance, 2007-H1 2012
                                                                                                        • Income protection
                                                                                                          • Policy sales increase as average annual premium costs decrease
                                                                                                            • Figure 20: New individual income protection sales, by value and volume, and average annual premiums, 2007-H1 2012
                                                                                                        • Distribution Overview

                                                                                                          • Key points
                                                                                                            • Life and protection channels to market rely heavily on intermediaries
                                                                                                              • Term assurance
                                                                                                                • IFAs have the edge in the term assurance market
                                                                                                                  • Figure 21: Total new premiums for individual regular-premium term assurance policies written, by distribution channel and policy type, 2007-H1 2012
                                                                                                                • Critical illness
                                                                                                                  • CI rider benefit sales dominated by intermediaries
                                                                                                                    • Figure 22: Distribution of new individual CI rider benefit premiums, by channel, 2008-H1 2012
                                                                                                                  • IFAs account for the majority of standalone CI premiums
                                                                                                                    • Figure 23: Distribution of new individual standalone CI premiums, by channel, 2007-H1 2012
                                                                                                                  • Income protection
                                                                                                                    • Just over half of new IP premiums are sold by IFAs
                                                                                                                      • Figure 24: Distribution of new individual IP premiums, by distribution channel, 2009-H1 2012
                                                                                                                    • Direct sales opportunities are limited in the protection market
                                                                                                                    • Intermediary Company Profiles

                                                                                                                      • Sesame Bankhall Group
                                                                                                                          • Figure 25: Key financial data for Sesame Bankhall Group Limited, 2010 and 2011
                                                                                                                        • Openwork
                                                                                                                            • Figure 26: Key financial data for Openwork Limited, 2009 and 2010
                                                                                                                          • Intrinsic Financial Services
                                                                                                                              • Figure 27: Key financial data for Intrinsic Financial Services Limited, 2010 and 2011
                                                                                                                            • Positive Solutions
                                                                                                                                • Figure 28: Key financial data for Positive Solutions Financial Services Limited, 2009 and 2010
                                                                                                                              • LifeSearch Limited
                                                                                                                                  • Figure 29: Key financial data for LifeSearch Limited, 2010 and 2011
                                                                                                                                • Cavendish Online
                                                                                                                                • Brand Communication and Promotion

                                                                                                                                  • Key points
                                                                                                                                    • Adspend on protection products jumps in 2011/12
                                                                                                                                      • Figure 30: Overview of total adspend on protection products, 2009/10-2011/12*
                                                                                                                                    • IP advertising is responsible for the overall jump in adspend
                                                                                                                                      • Figure 31: Adspend on protection products, by category, 2009/10-2011/12
                                                                                                                                    • Unum accounts for almost a quarter of all protection product adspend
                                                                                                                                      • Figure 32: Top 15 advertisers of protection products, 2011/12
                                                                                                                                    • TV advertising dominates over other protection advertising methods
                                                                                                                                      • Figure 33: Overview of media type used to advertise protection products, 2011/12
                                                                                                                                    • Advertising in intermediary and trade press declines by over 50%
                                                                                                                                      • Figure 34: Adspend in intermediary and trade press*, 2010/11 and 2011/12
                                                                                                                                  • The IFA – Challenges in the Life and Protection Market

                                                                                                                                    • Key points
                                                                                                                                      • The challenging economy is the main barrier to life and protection sales
                                                                                                                                        • Figure 35: Barriers to life and protection sales, 2011 and 2012
                                                                                                                                      • IFAs and insurers can work to educate customers
                                                                                                                                        • Point-of-sale advantage and better offers direct from insurers a concern
                                                                                                                                          • Adviser confidence has not changed in the last six months
                                                                                                                                            • Figure 36: Adviser confidence levels, August 2012
                                                                                                                                          • IFAs worried about housing market confidence
                                                                                                                                            • Figure 37: Impact of consumer confidence in the housing market, August 2012
                                                                                                                                        • The IFA – Client Behaviour

                                                                                                                                          • Key points
                                                                                                                                            • Changes in client priorities are harming protection product sales
                                                                                                                                              • Figure 38: Changes in client behaviour, August 2012
                                                                                                                                            • Independent consumers pose a risk to advisers
                                                                                                                                              • Consumers developing a taste for technology
                                                                                                                                                • Simplicity and customer focus are needed to improve product awareness
                                                                                                                                                  • Figure 39: Ways to improve life and protection sales to clients, August 2012
                                                                                                                                                • Consumer purchase triggers
                                                                                                                                                  • Figure 40: Life insurance purchase triggers, May 2012
                                                                                                                                              • The IFA – Protection Industry Approach to RDR

                                                                                                                                                • Key points
                                                                                                                                                  • Fears of negative business impact from the RDR
                                                                                                                                                    • Figure 41: RDR business impact, August 2012
                                                                                                                                                  • One in ten advisers are unsure of their post-RDR plans
                                                                                                                                                    • Figure 42: Business model plans, August 2012

                                                                                                                                                Companies Covered

                                                                                                                                                • Aegon UK
                                                                                                                                                • Apple Computer UK Ltd
                                                                                                                                                • Bankhall Investment Associates Ltd
                                                                                                                                                • Halifax Mortgage Services
                                                                                                                                                • Honister Capital
                                                                                                                                                • Intrinsic Financial Services
                                                                                                                                                • Just Retirement Ltd
                                                                                                                                                • Legal & General Group PLC
                                                                                                                                                • Lloyds Banking Group
                                                                                                                                                • MetLife Investors Insurance
                                                                                                                                                • Money Portal Limited
                                                                                                                                                • NatWest
                                                                                                                                                • Octopus Investments
                                                                                                                                                • Openwork
                                                                                                                                                • Positive Solutions
                                                                                                                                                • Prudential plc
                                                                                                                                                • Scottish Equitable
                                                                                                                                                • Sesame Bankhall Group Limited
                                                                                                                                                • Zurich Financial Services

                                                                                                                                                Life and Protection - Intermediary Focus - UK - November 2012

                                                                                                                                                £1,995.00 (Excl.Tax)