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Term Assurance - UK - June 2013

“Mintel’s research identifies around 3.4 million prospective life insurance customers. These are people who do not currently have a policy, but who say they might consider arranging one within the next 12 months. There is clearly good potential to expand the market by promoting simple, affordable and flexible solutions, which will appeal to these market prospects.”

- Sarah Hitchcock, Senior Financial Services Analyst

Some questions answered in this report include:

  • What are the short-term prospects for life insurers?
  • What impact are online aggregators having on this market?
  • Why do more than half the population eschew cover?
  • How can providers broaden the appeal of term assurance?
  • What is the argument for a simple life cover product?
  • Will the average premium continue to fall?

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Table of contents

  1. Introduction

      • Report scope and market definition
        • Abbreviations
        • Executive Summary

            • The market
              • Standard model predicts slow premium growth
                • Figure 1: Forecast of total new individual term assurance premiums, at current prices – fan chart, 2007-17
              • Recent performance
                • Market factors
                  • Greater regulation and mixed economic backdrop
                    • Rising claims costs
                      • Changing homeownership trends
                        • Company, brands and innovation
                          • A concentrated market
                            • Figure 2: Market shares of the top five providers of individual term assurance, based on volume of new sales, 2012
                          • Product innovation
                            • Advertising activity
                              • Distribution trends
                                • The consumer
                                  • Overall penetration of life cover
                                    • Figure 3: Segmentation of UK adult population, by life insurance provision, March 2013
                                  • Ownership of the main policy types
                                    • Figure 4: Ownership of life insurance and related protection products, March 2013
                                  • Main reasons for eschewing cover
                                    • Figure 5: Top eight reasons for not having life insurance, March 2013
                                  • Sources used or consulted before purchase
                                    • Figure 6: Sources used/consulted to help select policy/provider, March 2013
                                  • Factors influencing policy choice
                                    • Figure 7: Factors influencing policy selection, March 2013
                                  • General attitudes towards protection insurance
                                    • Identifying new prospects
                                      • What we think
                                      • Issues in the Market

                                          • What are the short-term prospects for life insurers?
                                            • What impact are online aggregators having on this market?
                                              • Why do more than half the population eschew cover?
                                                • How can providers broaden the appeal of term assurance?
                                                  • What is the argument for a simple life cover product?
                                                    • Will the average premium continue to fall?
                                                    • Trend Application

                                                      • Trend: Help Me Help Myself
                                                        • Trend: Let’s Make a Deal
                                                          • 2015: Brand Intervention
                                                          • Market Drivers

                                                            • Key points
                                                              • Life insurance industry is shaped by a broad range of factors
                                                                • Recent and forthcoming regulation, legislation and new initiatives
                                                                  • Tough economic backdrop has mixed implications for insurers
                                                                    • Depressed housing market hampers growth in the mortgage term sector
                                                                      • The privately rented sector continues to expand
                                                                        • Figure 8: UK housing stock, by tenure, 1991-2011
                                                                      • Housing transactions continue to run well below pre-crisis levels
                                                                        • Figure 9: Number of UK residential property transactions with a value of £40,000 upwards – seasonally adjusted, Q1 2007-Q4 2012
                                                                      • 2012 saw modest growth in first-time buyer and home mover loans
                                                                        • Figure 10: Number of loans for house purchase, by type of borrower, 2007-12
                                                                      • Average sums assured linked to mortgage advances
                                                                        • Figure 11: Average sum insured for new term assurance policies versus average first-time buyer advance, 2003-12
                                                                      • Assumptions are based on mortality rates
                                                                        • Figure 12: Number of deaths in England and Wales, by age and gender, 2011
                                                                      • Increasing longevity has helped to alleviate pressure on premiums
                                                                        • Figure 13: Period life expectancy from birth for men and women, 1985-2035
                                                                      • People are living longer, but not necessarily in good health…
                                                                        • … leading to rising claim costs on protection policies
                                                                        • Competitor Products

                                                                          • Key points
                                                                            • More than half of all UK adults have no form of life cover
                                                                              • Figure 14: Segmentation of UK adult population, by life insurance provision, March 2013
                                                                            • Death-in-service benefit should be view as a supplementary rather than alternative option
                                                                              • There are more whole-of-life than term policies in force
                                                                                • Figure 15: Number of individual protection policies in force, by type, 2011
                                                                              • Some 45% of new mortgage term and 35% of protection term assurance sales included critical illness cover in 2012
                                                                                • Figure 16: Critical illness rider benefits as a proportion of new individual term assurance business, 2008-12
                                                                            • Market SWOT Analysis

                                                                                • Figure 17: Term assurance market – strengths, weaknesses, opportunities and threats, 2013
                                                                            • Who’s Innovating?

                                                                              • Key points
                                                                                • Slowdown in product development
                                                                                  • BGL subsidiary launches direct-only life cover
                                                                                    • Direct Life develops universal application for protection advisers
                                                                                      • Providers start to add protection products to adviser platforms
                                                                                      • Market Size and Forecast

                                                                                        • Key points
                                                                                          • Business in force
                                                                                            • Sales of term assurance were up 5% in 2012…
                                                                                              • Figure 18: New individual term assurance sales and average annual premium, 2008-12
                                                                                            • … driven mainly by a strong rise in protection term business…
                                                                                              • Figure 19: Volume of new individual regular-premium term assurance policy sales, by policy type, 2008-12
                                                                                            • … where the average cost of a new policy continues to fall
                                                                                              • Figure 20: Average new premium – mortgage term versus protection term, 2008-12
                                                                                            • Slow premium growth forecast
                                                                                              • Figure 21: Forecast of total new term insurance premiums, at current prices – fan chart, 2007-17
                                                                                              • Figure 22: Forecast of new individual critical illness premiums, at current and constant prices, 2008-17
                                                                                            • Forecast methodology
                                                                                              • Fan chart explanation
                                                                                              • Market Share

                                                                                                • Key points
                                                                                                  • Legal & General strengthens its market-leading position
                                                                                                    • Figure 23: Top five providers of individual term assurance, by sales volumes, 2012
                                                                                                • Companies and Products

                                                                                                    • Legal & General
                                                                                                        • Figure 24: Key financial data for Legal & General, 2011-12
                                                                                                      • Aviva
                                                                                                          • Figure 25: Key financial data for Aviva plc, 2011-12
                                                                                                        • LBG and Scottish Widows
                                                                                                            • Figure 26: Key financial information for LBG’s insurance division, 2011-12
                                                                                                          • Friends Life
                                                                                                              • Figure 27: Key financial data for Friends Life, 2011-12
                                                                                                            • Royal London Group (Scottish Provident and Bright Grey)
                                                                                                                • Figure 28: Key financial information for Royal London Group, 2011-12
                                                                                                            • Brand Communication and Promotion

                                                                                                              • Key points
                                                                                                                • Above-the-line advertising on life insurance products is fairly limited
                                                                                                                  • Figure 29: Total advertising expenditure on life assurance products, by product category, 2009-13
                                                                                                                • Aviva is once again the leading advertiser of term assurance
                                                                                                                  • Figure 30: Top ten advertisers of (term) life insurance products, 2011-13
                                                                                                                • TV, direct mail and online account for the majority of adspend
                                                                                                                  • Figure 31: Advertising expenditure on (term) life insurance products, by media type, 2011-13
                                                                                                              • Channels to Market

                                                                                                                • Key points
                                                                                                                  • Most term assurance business is sold with advice
                                                                                                                    • IFAs wrestle share of the mortgage term market away from tied advisers
                                                                                                                      • Figure 32: Mortgage term assurance premiums, by distribution channel, 2008-12
                                                                                                                    • IFAs enjoy an even greater share of the protection term sector
                                                                                                                      • Figure 33: Protection term assurance premiums, by distribution channel, 2008-12
                                                                                                                  • Ownership of Life Insurance and Related Protection Products

                                                                                                                    • Key points
                                                                                                                      • Survey background
                                                                                                                        • Having dependents and a mortgage increases the attraction of life cover…
                                                                                                                            • Figure 34: Ownership of life insurance, by all adults, those with children and mortgage holders, March 2013
                                                                                                                          • … and similarly, critical illness cover
                                                                                                                              • Figure 35: Ownership of related protection insurance products, by all adults, those with children and mortgage holders, March 2013
                                                                                                                            • Nearly one in three term assurance policyholders also have critical illness cover
                                                                                                                              • Figure 36: Ownership related protection products, by term life insurance policyholders, March 2013
                                                                                                                            • Take-up of life cover is highest among those aged 35-54
                                                                                                                              • Figure 37: Ownership of life insurance and related protection products, by age, March 2013
                                                                                                                            • The typical term assurance policyholder
                                                                                                                            • Sources Consulted Prior to Purchase

                                                                                                                              • Key points
                                                                                                                                • Most policyholders consulted an adviser before purchase
                                                                                                                                    • Figure 38: Sources used/consulted to help select policy/provider, by type of policy held, March 2013
                                                                                                                                  • Younger adults are more likely to turn to web aggregators and social networking sites
                                                                                                                                    • Figure 39: Sources used/consulted to help select policy/provider, by age, March 2013
                                                                                                                                • Factors Influencing Purchase

                                                                                                                                  • Key points
                                                                                                                                    • Price governs policy selection
                                                                                                                                        • Figure 40: Factors influencing policy selection, by type of policy held, March 2013
                                                                                                                                      • Only a minority are influenced by presence on price comparison site
                                                                                                                                      • Take-up Barriers

                                                                                                                                        • Key points
                                                                                                                                          • Cost is the top barrier to take-up
                                                                                                                                              • Figure 41: Reasons for not having life insurance, March 2013
                                                                                                                                            • A minority avoid cover due to health concerns
                                                                                                                                              • Parents and renters are least able to afford cover
                                                                                                                                                • Figure 42: Reasons for not having life insurance, by presence of children in household and tenure, March 2013
                                                                                                                                              • How age factors into the equation
                                                                                                                                                • Figure 43: Reasons for not having life insurance, by age, March 2013
                                                                                                                                            • Attitudes Towards Life Insurance

                                                                                                                                              • Key points
                                                                                                                                                • Most people appreciate the need for the cover...
                                                                                                                                                    • Figure 44: Agreement with statements about the importance and relevance of life insurance, March 2013
                                                                                                                                                  • ... particularly those who have it
                                                                                                                                                    • Figure 45: Agreement with statements about the importance and relevance of life insurance, by ownership of life insurance, March 2013
                                                                                                                                                  • Two thirds of UK adults believe that it’s easy to arrange insurance online
                                                                                                                                                      • Figure 46: Agreement with statements about ease of arranging cover and product flexibility, March 2013
                                                                                                                                                    • Two thirds of UK adults believe that it’s easy to arrange insurance online
                                                                                                                                                      • Figure 47: Agreement with statements about ease of arranging cover and product flexibility, by ownership of life insurance, March 2013
                                                                                                                                                  • Upcoming Lifestage Events and Insurance Purchase Intentions

                                                                                                                                                    • Key points
                                                                                                                                                      • Important lifestage events facilitate the need for the cover
                                                                                                                                                          • Figure 48: Lifestage events and insurance-related plans within the next 12 months, March 2013
                                                                                                                                                        • Over 3 million new prospects
                                                                                                                                                          • Figure 49: Lifestage events and insurance-related plans within the next 12 months, by most popular ownership of life insurance, March 2013
                                                                                                                                                      • Appendix – Definitions and Industry Regulation

                                                                                                                                                        • Main types of life insurance
                                                                                                                                                          • Other long-term protection policies
                                                                                                                                                            • Short-term insurance protection policies
                                                                                                                                                              • Additional regulatory milestones occurring within the past few years
                                                                                                                                                                • Other noteworthy initiatives
                                                                                                                                                                • Appendix – Market Size and Forecast

                                                                                                                                                                  • Total market forecast – best- and worst-case scenarios
                                                                                                                                                                    • Figure 50: Forecast of new individual term assurance premiums – best- and worst-case scenarios, at current prices, 2012-17
                                                                                                                                                                  • Market forecast by sector
                                                                                                                                                                    • Figure 51: Forecast of new individual term assurance premiums, by sector, at current prices, 2008-17
                                                                                                                                                                  • Mortgage term sector forecast
                                                                                                                                                                    • Figure 52: Forecast of new mortgage term assurance premiums, at current prices – fan chart, 2007-17
                                                                                                                                                                    • Figure 53: Forecast of new mortgage term assurance premiums, 2012-17
                                                                                                                                                                    • Figure 54: Forecast of new mortgage term assurance premiums – best- and worst-case scenarios, at current prices, 2012-17
                                                                                                                                                                  • Protection term sector forecast
                                                                                                                                                                    • Figure 55: Forecast of new protection term assurance premiums, at current prices – fan chart, 2007-17
                                                                                                                                                                    • Figure 56: Forecast of new protection term assurance premiums, 2012-17
                                                                                                                                                                    • Figure 57: Forecast of new protection term assurance premiums – best- and worst-case scenarios, at current prices, 2012-17
                                                                                                                                                                  • Forecast methodology
                                                                                                                                                                    • Fan chart explanation
                                                                                                                                                                    • Appendix – Ownership of Life Insurance and Related Protection Products

                                                                                                                                                                        • Figure 58: Ownership of life insurance, by demographics, March 2013
                                                                                                                                                                        • Figure 59: Ownership of related protection products, by demographics, March 2013
                                                                                                                                                                    • Appendix – Sources Consulted Prior to Purchase

                                                                                                                                                                        • Figure 60: Most popular sources used/consulted to help select policy/provider, by demographics, March 2013
                                                                                                                                                                        • Figure 61: Next most popular sources used/consulted to help select policy/provider, by demographics, March 2013
                                                                                                                                                                    • Appendix – Factors Influencing Purchase

                                                                                                                                                                        • Figure 62: Top five factors influencing policy selection, by demographics, March 2013
                                                                                                                                                                        • Figure 63: Next five most popular factors influencing policy selection, by demographics, March 2013
                                                                                                                                                                        • Figure 64: Least popular factors influencing policy selection, by demographics, March 2013
                                                                                                                                                                    • Appendix – Take-up Barriers

                                                                                                                                                                        • Figure 65: Top five reasons for not having life insurance, by demographics, March 2013
                                                                                                                                                                        • Figure 66: Next four most common reasons for not having life insurance, by demographics, March 2013
                                                                                                                                                                        • Figure 67: Other reasons for not having life insurance, by demographics, March 2013
                                                                                                                                                                    • Appendix – Attitudes Towards Life Insurance

                                                                                                                                                                        • Figure 68: Agreement with statements about the importance and relevance of life insurance, by demographics, March 2013
                                                                                                                                                                        • Figure 69: Agreement with statements about ease of arranging cover and product flexibility, by demographics, March 2013
                                                                                                                                                                    • Appendix – Upcoming Lifestage Events and Insurance Purchase Intentions

                                                                                                                                                                        • Figure 70: Lifestage events planned over the next 12 months, by demographics, March 2013
                                                                                                                                                                        • Figure 71: Life insurance-related plans within the next 12 months, by demographics, March 2013

                                                                                                                                                                    Companies Covered

                                                                                                                                                                    • Aviva Plc
                                                                                                                                                                    • AXA UK plc
                                                                                                                                                                    • Barclays Bank plc
                                                                                                                                                                    • Bright Grey
                                                                                                                                                                    • BUPA
                                                                                                                                                                    • Friends Provident plc
                                                                                                                                                                    • Grupo Santander Central Hispano S.A.
                                                                                                                                                                    • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                                    • Legal & General Group PLC
                                                                                                                                                                    • Lloyds Banking Group
                                                                                                                                                                    • Marks & Spencer
                                                                                                                                                                    • Nationwide Building Society
                                                                                                                                                                    • Pearl Group Limited
                                                                                                                                                                    • Royal Bank of Scotland Group plc
                                                                                                                                                                    • Royal London Group
                                                                                                                                                                    • Sainsbury's Bank
                                                                                                                                                                    • Scottish Provident
                                                                                                                                                                    • Scottish Widows Bank plc
                                                                                                                                                                    • Sesame Bankhall Group Limited

                                                                                                                                                                    Term Assurance - UK - June 2013

                                                                                                                                                                    £1,995.00 (Excl.Tax)