Term Assurance - UK - July 2011
The term assurance market has performed relatively well during times of economic uncertainty and as a result the term assurance protection gap has remained stable at £2.4 trillion. Furthermore, the number of new policies sold increased by 5.8% in 2010. This growth has been achieved despite difficult market conditions, including a drop in mortgage lending and falling consumer expenditure.
However, it is not all positive news for providers. While the number of policies increased in 2010, the value of total term assurance premiums dropped by 4.3% during the same period, squeezing providers’ profit margins. Product profitability could come under further scrutiny following the implementation of the European Court of Justice gender ruling and the Solvency II Directive. If providers are to expand ownership of term assurance products, they will need to ensure consumers are not priced out of the market. Currently more than 50% of adults have no life insurance cover – a problem that could be exacerbated by large price hikes.
In addition, the industry is suffering from a lack of consumer engagement which can cause consumers to distrust providers and misjudge the cost of cover. Despite improving standards and a decline in complaints, many consumers remain sceptical about the financial services industry. The onus will therefore be on providers to increase and improve communication with existing customers and the wider public in order to tackle misconceptions and grow the term assurance market.
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