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Whole of Life Insurance - UK - July 2014

“Funeral price inflation, coupled with the continued squeeze on household finances, is posing a challenge in the over-50s market. Guaranteed acceptance plans offering increasing premiums can help mitigate the uncertainty over the real value of policyholders’ future payouts. However, the key demographic faces the risk of not being able to afford to pay rising premiums, leading to a loss in cover and potentially negative publicity for the industry.”
 – Chryso Kolakkides, Senior Financial Services Analyst

This report looks at the following issues:

  • Over-50s product reputation harmed by perceived poor value for money
  • Guaranteed acceptance plans face the challenge of rising funeral costs
  • Increasing premiums to tackle inflation can undermine consumers’ affordability of the product

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Table of contents

  1. Introduction

      • Report scope and definitions
        • Abbreviations
        • Executive Summary

            • The market
              • Over-50s market to return to growth steadily
                • Figure 1: Forecast for total value of new guaranteed acceptance plans, 2010-19
              • New whole-of-life business on a downward path since 2012
                • Figure 2: Volume and value of new individual regular-premium whole-of-life insurance policies, 2006-13
              • Guaranteed acceptance plan business driven by non-advised distribution
                • Figure 3: Proportional distribution of new whole-of-life premiums, by sales channel, 2013
              • Market factors
                • UK’s ageing population increases the target market
                  • Large proportion of over-50s have low savings
                    • Funeral costs continue to rise
                      • Exit of banks and building societies from the over-50s market
                        • European Gender Directive gives rise to gender-neutral pricing
                          • ABI releases its Guidance on Over 50s Plans
                            • Companies, brands and innovation
                              • Top five players dominate the whole-of-life insurance market
                                • Figure 4: Top five individual product providers, by number of new individual whole-of-life sales, 2013
                              • Recent product developments
                                • Adspend on over-50s life protection drops by 25% in 2014
                                  • The consumer
                                    • One in five over-50s have whole-of-life cover
                                      • Figure 5: Life insurance product ownership, March 2014
                                    • Financial protection for family is the principal trigger for life cover purchase
                                      • Figure 6: Life cover purchase triggers, March 2014
                                    • 31% of policyholders consider brand strength as important
                                      • Figure 7: Factors influencing choice of life insurance plan, March 2014
                                    • 29% without life insurance have no debts to pay off
                                      • Figure 8: Reasons for not having life insurance, March 2014
                                    • Nearly half believe funerals cost between £3,000 and £4,999
                                      • Figure 9: Awareness of funeral costs, March 2014
                                    • Just over one in four respondents are preparing financially for their funeral
                                      • Figure 10: Financial planning for funeral costs, March 2014
                                    • What we think
                                    • Issues and Insights

                                        • Over-50s product reputation harmed by perceived poor value for money
                                          • The facts
                                            • The implications
                                              • Guaranteed acceptance plans face the challenge of rising funeral costs
                                                • The facts
                                                  • The implications
                                                    • Increasing premiums to tackle inflation can undermine consumers’ affordability of the product
                                                      • The facts
                                                        • The implications
                                                        • Trend Application

                                                          • Educating the over-50s to prepare for the worst
                                                            • Established retail brands can enter the over-50s life cover market
                                                              • Targeting the over-50s through cross-selling
                                                              • Market Drivers

                                                                • Key points
                                                                  • UK’s ageing population increases the target market
                                                                    • Figure 11: Trends in the UK total population, by age, 1992-2030
                                                                  • Large proportion of over-50s have low savings
                                                                    • Figure 12: Value of savings, by age, January 2014
                                                                  • Funeral costs continue to rise
                                                                    • Exit of banks and building societies from the over-50s market
                                                                      • Effect of RDR on the whole-of-life market
                                                                        • European Gender Directive gives rise to gender-neutral pricing
                                                                          • ABI releases its Guidance on Over 50s Plans
                                                                          • Who’s Innovating?

                                                                            • Key points
                                                                              • Over-50s guaranteed acceptance plans
                                                                                • Asda’s Over 50s Life Cover offers capped premiums
                                                                                  • British Seniors enters the market with increasing premium policy
                                                                                    • Engage Mutual includes serious and terminal illness cover with its Over 50 Life Cover Plus
                                                                                      • Underwritten whole-of-life insurance
                                                                                        • Aviva’s response to RDR for whole-of-life advisers
                                                                                          • LV= widens its whole-of-life cover options in response to RDR
                                                                                          • Market Size and Forecast

                                                                                            • Key points
                                                                                              • New whole-of-life business on a downward path since 2012
                                                                                                • Figure 13: Volume and value of new individual regular-premium whole-of-life insurance policies, 2006-13
                                                                                                • Figure 14: Volume of new regular-premium whole-of-life business, by product type, 2010-13
                                                                                              • Severe drop in post-RDR whole-of-life sales
                                                                                                • Fall in new premiums is less severe
                                                                                                  • Figure 15: Value of new regular-premium whole-of-life business, by product type, 2010-13
                                                                                                • Over-50s market to return to steady growth in value terms
                                                                                                  • Figure 16: Forecast for total value of new guaranteed acceptance plans, 2010-19
                                                                                                  • Figure 17: Forecast for total value of new guaranteed acceptance plans, at current and constant prices, 2010-19
                                                                                                • Slow growth in number of new sales forecast in over-50s market
                                                                                                  • Figure 18: Forecast for total volume of new guaranteed acceptance plans, 2010-19
                                                                                                  • Figure 19: Forecast for total volume of new guaranteed acceptance plans, 2010-19
                                                                                                • Forecast methodology
                                                                                                • Market Share

                                                                                                  • Key points
                                                                                                    • Top five players dominate the whole-of-life insurance market…
                                                                                                      • Figure 20: Top five individual product providers, by number of new individual whole-of-life sales, 2013
                                                                                                    • …but competition is increasing
                                                                                                      • Figure 21: Leading providers of over-50s guaranteed acceptance plans, May 2014
                                                                                                  • Companies and Products

                                                                                                    • Sun Life Direct (AXA Wealth)
                                                                                                      • Company description
                                                                                                        • Whole-of-life insurance product range
                                                                                                          • Recent financial performance
                                                                                                            • Figure 22: Financial performance of AXA Life & Savings business (group level), 2012 and 2013
                                                                                                          • Recent activity
                                                                                                            • Aviva
                                                                                                              • Company description
                                                                                                                • Whole-of-life insurance product range
                                                                                                                  • Recent financial performance
                                                                                                                    • Figure 23: Financial performance of Aviva Plc Life Business (UK & Ireland), 2012 and 2013
                                                                                                                  • Recent activity
                                                                                                                    • LV=
                                                                                                                      • Company description
                                                                                                                        • Whole-of-life insurance product range
                                                                                                                          • Recent financial performance
                                                                                                                            • Figure 24: Financial performance of LV= life protection business, UK, 2012 and 2013
                                                                                                                          • Recent activity
                                                                                                                            • PruProtect
                                                                                                                              • Company description
                                                                                                                                • Whole-of-life insurance product range
                                                                                                                                  • Recent financial performance
                                                                                                                                    • Figure 25: Financial performance of PruProtect business*, 2012 and 2013
                                                                                                                                  • Recent activity
                                                                                                                                    • Legal & General
                                                                                                                                      • Company description
                                                                                                                                        • Whole-of-life insurance product range
                                                                                                                                          • Recent financial performance
                                                                                                                                            • Figure 26: Financial performance of Legal & General Assurance, 2012 and 2013
                                                                                                                                          • Recent activity
                                                                                                                                            • Engage Mutual
                                                                                                                                              • Company description
                                                                                                                                                • Whole-of-life product range
                                                                                                                                                  • Recent financial performance
                                                                                                                                                    • Figure 27: Financial performance of Engage Mutual Life Insurance Business, 2012 and 2013
                                                                                                                                                  • Recent activity
                                                                                                                                                  • Brand Communication and Promotion

                                                                                                                                                    • Key points
                                                                                                                                                      • Adspend on over-50s life protection dropped by 25% in 2013/14
                                                                                                                                                        • Figure 28: Total advertising expenditure on life protection products, by product category, 2009/10-2013/14 (year ending 30 April)
                                                                                                                                                      • Sun Life Direct holds its position as top advertiser in the over-50s life insurance market
                                                                                                                                                        • Figure 29: Top 10 advertisers of over-50s life insurance products, 2011/12-2013/14 (year ending 30 April)
                                                                                                                                                      • Direct mail in the over-50s market accounts for over half of adspend
                                                                                                                                                        • Figure 30: Proportional distribution of adspend on over-50s life insurance products, by media type, 2013/14 (year ending 30 April)
                                                                                                                                                      • Negative publicity through the media
                                                                                                                                                        • A note on adspend
                                                                                                                                                        • Channels to Market

                                                                                                                                                          • Key points
                                                                                                                                                            • Guaranteed acceptance plan business driven by non-advised distribution
                                                                                                                                                              • Figure 31: New individual regular-premium whole-of-life business, by sales channel, 2013
                                                                                                                                                              • Figure 32: Proportional distribution of new whole-of-life premiums, by sales channel, 2013
                                                                                                                                                            • Face-to-face advice still important for consumers…
                                                                                                                                                              • Figure 33: Sources of advice on life insurance policies, March 2014
                                                                                                                                                            • …but digital channels are likely to pick up
                                                                                                                                                              • A note on the new adviser model categories now in effect
                                                                                                                                                              • Life Insurance Product Ownership

                                                                                                                                                                • Key points
                                                                                                                                                                  • Survey background
                                                                                                                                                                    • One in five over-50s have whole-of-life cover
                                                                                                                                                                        • Figure 34: Life insurance product ownership, March 2014
                                                                                                                                                                      • Over half of over-50s have no form of life cover
                                                                                                                                                                        • More than one in 10 over-50s are unsure about their policy
                                                                                                                                                                          • Affluence affects choice of whole-of-life cover
                                                                                                                                                                            • Figure 35: Life insurance product ownership, by household income, March 2014
                                                                                                                                                                          • Women are less likely to own whole-of-life cover
                                                                                                                                                                            • Figure 36: Life insurance product ownership, by gender, March 2014
                                                                                                                                                                          • Consumers tend to have one type of life insurance product
                                                                                                                                                                            • Figure 37: Number of life insurance products owned, March 2014
                                                                                                                                                                        • Life Cover Purchase Triggers

                                                                                                                                                                          • Key points
                                                                                                                                                                            • Financial protection for family remains the principal trigger for life cover purchase…
                                                                                                                                                                              • Figure 38: Life cover purchase triggers, 2012 and 2014
                                                                                                                                                                            • …followed by mortgage cover
                                                                                                                                                                              • Figure 39: Life insurance product ownership, by purchase triggers, March 2014
                                                                                                                                                                            • Whole-of-life cover is largely triggered by funeral costs
                                                                                                                                                                              • Financial situation influences motivation to purchase life cover
                                                                                                                                                                                • Figure 40: Life cover purchase triggers, by household income, March 2014
                                                                                                                                                                            • Factors Influencing Choice of Life Insurance Plan

                                                                                                                                                                              • Key points
                                                                                                                                                                                • 31% of policyholders consider brand strength as important
                                                                                                                                                                                  • Figure 41: Factors influencing choice of life insurance plan, March 2014
                                                                                                                                                                                • Role of gifts and celebrity endorsement rank very low
                                                                                                                                                                                  • Nearly one in five value simplicity
                                                                                                                                                                                    • Low monthly premiums are most important factor for guaranteed acceptance plan holders
                                                                                                                                                                                      • Figure 42: Factors influencing choice of life insurance plan, by life insurance product ownership, March 2014
                                                                                                                                                                                    • Recommendations are also highly influential
                                                                                                                                                                                    • Reasons for Not Having Life Insurance

                                                                                                                                                                                      • Key points
                                                                                                                                                                                        • 29% without life insurance have no debts to pay off
                                                                                                                                                                                          • Figure 43: Reasons for not having life insurance, March 2014
                                                                                                                                                                                          • Figure 44: Reasons for not having life insurance, by age, March 2014
                                                                                                                                                                                        • Some cannot afford life insurance
                                                                                                                                                                                          • Figure 45: Over-50s who cannot afford to pay for life insurance, by age, March 2014
                                                                                                                                                                                        • One in five prefer saving than paying life insurance premiums…
                                                                                                                                                                                          • …and 17% claim to have made other plans
                                                                                                                                                                                            • Retaining access to their money is important to the over-50s
                                                                                                                                                                                            • Consumer Awareness of Funeral Costs

                                                                                                                                                                                              • Key points
                                                                                                                                                                                                • Nearly half believe funerals cost between £3,000 and £4,999…
                                                                                                                                                                                                    • Figure 46: Awareness of funeral costs, March 2014
                                                                                                                                                                                                  • …while funeral costs can easily reach the higher ranges
                                                                                                                                                                                                    • Rising funeral costs present an opportunity for over-50s plans…
                                                                                                                                                                                                      • …but also a major challenge
                                                                                                                                                                                                      • Financial Planning for Funeral Costs

                                                                                                                                                                                                        • Key points
                                                                                                                                                                                                          • Just over one in four respondents are preparing financially for their funeral
                                                                                                                                                                                                            • Figure 47: Financial planning for funeral costs, March 2014
                                                                                                                                                                                                          • Age impacts people’s saving towards funerals
                                                                                                                                                                                                            • Figure 48: Financial planning for funeral costs, by age, March 2014
                                                                                                                                                                                                            • Figure 49: Value of savings and investments, by age, January 2014
                                                                                                                                                                                                          • Prepaid funeral plans stand as a rival to guaranteed acceptance plans
                                                                                                                                                                                                            • Figure 50: Life insurance product ownership, by financial planning for funeral costs, March 2014
                                                                                                                                                                                                        • Appendix – Market Size and Forecast

                                                                                                                                                                                                            • Figure 51: Best- and worst-case forecast for total value of new guaranteed acceptance plans, 2014-19
                                                                                                                                                                                                            • Figure 52: Best- and worst-case forecast for total volume of new guaranteed acceptance plans, 2014-19
                                                                                                                                                                                                        • Appendix – Channels to Market

                                                                                                                                                                                                            • Figure 53: Sources of advice on life insurance policies, by demographics, March 2014
                                                                                                                                                                                                            • Figure 54: Sources of advice on life insurance policies, by demographics, March 2014 (continued)
                                                                                                                                                                                                            • Figure 55: Sources of advice on life insurance policies, by demographics, March 2014 (continued)
                                                                                                                                                                                                        • Appendix – Life Insurance Product Ownership

                                                                                                                                                                                                            • Figure 56: Life insurance product ownership, by demographics, March 2014
                                                                                                                                                                                                            • Figure 57: Life insurance product ownership, by demographics, March 2014 (continued)
                                                                                                                                                                                                            • Figure 58: Life insurance product ownership, by demographics, March 2014 (continued)
                                                                                                                                                                                                            • Figure 59: Number of life insurance product owned, by demographics, March 2014
                                                                                                                                                                                                        • Appendix – Life Cover Purchase Triggers

                                                                                                                                                                                                            • Figure 60: Life cover purchase triggers, by demographics, March 2014
                                                                                                                                                                                                            • Figure 61: Life cover purchase triggers, by demographics, March 2014 (continued)
                                                                                                                                                                                                        • Appendix – Factors Influencing Choice of Insurance Plan

                                                                                                                                                                                                            • Figure 62: Factors influencing choice of life insurance plan, by demographics, March 2014
                                                                                                                                                                                                            • Figure 63: Factors influencing choice of life insurance plan, by demographics, March 2014 (continued)
                                                                                                                                                                                                        • Appendix – Reasons for Not Having Life Insurance

                                                                                                                                                                                                            • Figure 64: Reasons for not having life insurance, by demographics, March 2014
                                                                                                                                                                                                            • Figure 65: Reasons for not having life insurance, by demographics, March 2014 (continued)
                                                                                                                                                                                                            • Figure 66: Reasons for not having life insurance, by demographics, March 2014 (continued)
                                                                                                                                                                                                        • Appendix – Consumer Awareness of Funeral Costs

                                                                                                                                                                                                            • Figure 67: Awareness of funeral costs, by demographics, March 2014
                                                                                                                                                                                                            • Figure 68: Awareness of funeral costs, by demographics, March 2014 (continued)
                                                                                                                                                                                                        • Appendix – Financial Planning for Funeral Costs

                                                                                                                                                                                                            • Figure 69: Financial planning for funeral costs, by demographics, March 2014

                                                                                                                                                                                                        Companies Covered

                                                                                                                                                                                                        • Aviva Plc
                                                                                                                                                                                                        • Dignity Plc
                                                                                                                                                                                                        • engage Mutual Assurance
                                                                                                                                                                                                        • Homeowners Friendly Society
                                                                                                                                                                                                        • Legal & General Group PLC
                                                                                                                                                                                                        • LV=

                                                                                                                                                                                                        Whole of Life Insurance - UK - July 2014

                                                                                                                                                                                                        £1,995.00 (Excl.Tax)