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Whole of Life Insurance - UK - May 2012

“Guaranteed acceptance plans are suitable for over-50s adults looking to plan the cost of their funeral, as they have now become almost synonymous to funeral plans. Product development and partnerships between insurers and funeral providers have blurred the lines between the two products over the years. The fact that many consumers take out life insurance to plan for funeral costs is extremely positive for the over-50s protection market, as demand for guaranteed acceptance plans should remain strong – especially as the average cost of a funeral continues to increase.”

– Stevan Obradovic, Financial Services Analyst

Some questions answered in this report include:

  • Why do consumers take out life insurance?
  • How are regulatory changes having an impact on the market?
  • Is there a high level of mistrust in the over-50s life insurance market?
  • Are guaranteed acceptance plans essentially a funeral cost planning tool?

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Table of contents

  1. Introduction

      • Definitions and report scope
        • Abbreviations
        • Executive Summary

            • The market
              • Market size and forecast
                • Figure 1: Forecast for total value of new individual regular-premium whole-of-life insurance policies, 2007-17
              • Direct sales account for majority of guaranteed acceptance plan sales
                • Figure 2: Proportional distribution of new whole-of-life premiums, by channel – guaranteed acceptance plan versus other whole-of-life, 2010-11
              • Market factors
                • Funeral costs continue to rise, increasing the appeal of over-50s life insurance
                  • Increasing life expectancy helps push down life insurance premiums
                    • Uncertainty about the impact of RDR on new business
                      • ECJ gender-neutral pricing and Solvency II could push up premiums
                        • Companies, brands and innovation
                          • Top five providers account for 86% of new whole-of-life sales
                            • Figure 3: Top five individual product providers, by number of new individual whole-of-life sales, 2010
                          • Brand promotion
                            • Who’s innovating?
                              • The over-50s consumer
                                • Life insurance ownership
                                  • Figure 4: Life insurance ownership, March 2012
                                • Purchase triggers
                                  • Figure 5: Purchase triggers, March 2012
                                • Influencing factors
                                  • Figure 6: Influencing factors, March 2012
                                • Future financial arrangements
                                  • Figure 7: Future financial arrangements, March 2012
                                • What we think
                                • Issues in the Market

                                    • Why do consumers take out life insurance?
                                      • How are regulatory changes having an impact on the market?
                                        • Is there a high level of mistrust in the over-50s life insurance market?
                                          • Are guaranteed acceptance plans essentially a funeral cost planning tool?
                                          • Future Opportunities

                                            • Simplicity is the name of the game
                                              • Linking policies to children’s savings accounts or education funds
                                              • Internal Market Environment

                                                • Key points
                                                  • Growth in over-50s population will increase the number of potential customers…
                                                    • Figure 8: Trends in the UK total population, by age, 1981-2026
                                                  • …and longevity should help to push down insurance premiums
                                                    • Mortality statistics help to shape guaranteed acceptance plan premiums
                                                      • Figure 9: Number of deaths in England and Wales, by age and gender, 2010
                                                    • Average funeral costs continue to rise
                                                      • Figure 10: Average cost of a funeral (including disbursements) in the UK, at current prices – UK, 2004-11
                                                    • Funeral payments could be available to those on a low income
                                                    • Broader Market Environment

                                                      • Key points
                                                        • Low interest rates could make over-50s life insurance more appealing
                                                          • Figure 11: Average monthly quoted deposit interest rates, January 2004-January 2012
                                                        • Life insurance payouts exceed premium income
                                                          • Figure 12: Total UK life insurance business – benefits paid and total net premium income, 2000-10
                                                        • Complaints about life insurance providers and IFAs fell in 2010/11
                                                          • Figure 13: Financial services firms complained about, by sector, 2006/07-2010/11
                                                        • Inheritance tax receipts increased slightly in 2010/11
                                                          • Figure 14: Value of IHT transfers on death, 2003/04-2010/11
                                                        • Placing policies ‘under trust’ could speed up payouts
                                                          • RDR will cause many IFA firms to leave the market…
                                                            • ...but focus on life insurance could intensify among remaining IFAs
                                                              • ECJ gender-neutral pricing will push up premiums for female clients
                                                                • I-E tax regime changes will impact life insurance premiums
                                                                  • Solvency II to reduce the risk of insolvency, but could push up premiums
                                                                    • Annual funding requirement for the FSA will rise in 2012/13
                                                                    • Competitive Context

                                                                      • Key points
                                                                        • Number of funeral plans on the up…
                                                                          • Figure 15: Number of funeral plan sales and number in force, UK, 2005-11
                                                                        • …but guaranteed acceptance plans are growing at a faster rate
                                                                        • SWOT Analysis

                                                                            • Figure 16: Guaranteed acceptance plan market – SWOT analysis, 2012
                                                                        • Who’s Innovating?

                                                                          • Key points
                                                                            • PruProtect to offer up-selling scheme to existing term assurance clients
                                                                              • Sun Life Direct launches online magazine LifeMatters and FinalMatters
                                                                                • Ellipse links up with bereavement charity to help families
                                                                                  • Healthy Living Programme announced by Legal & General
                                                                                  • Market Size and Forecast

                                                                                    • Key points
                                                                                      • Whole-of-life insurance market continues to grow
                                                                                        • Figure 17: Volume and value of new individual regular-premium whole-of-life insurance policies, 2001-12
                                                                                      • Guaranteed acceptance plans dominate new sales…
                                                                                        • Figure 18: Volume of new regular-premium whole-of-life business, by product type, 2006-11
                                                                                      • …but less so when it comes to new premiums
                                                                                        • Figure 19: Value of new regular-premium whole-of-life business, by product type, 2006-11
                                                                                      • Average guaranteed acceptance plan premiums fell in 2011
                                                                                        • Figure 20: Average annual premiums for new whole-of-life policies, by product type, 2006-11
                                                                                      • Market forecast
                                                                                        • Value of new whole-of-life business will continue to grow…
                                                                                          • Figure 21: Forecast for total value of new individual regular-premium whole-of-life insurance policies, 2007-17
                                                                                          • Figure 22: Forecast for total value of new individual regular-premium whole-of-life insurance policies, at current and constant prices, 2007-17
                                                                                        • …driven by an increase in the volume of new sales
                                                                                          • Figure 23: Forecast for total volume of new individual regular-premium whole-of-life insurance policies, 2007-17
                                                                                          • Figure 24: Forecast for total volume of new individual regular-premium whole-of-life insurance policies, 2007-17
                                                                                        • Forecast methodology
                                                                                        • Market Share

                                                                                          • Key points
                                                                                            • Sun Life Direct continues to dominate the market
                                                                                              • Figure 25: Top five individual product providers, by number of new individual whole-of-life sales, 2010
                                                                                            • Top five providers command 86% of new whole-of-life business
                                                                                              • Figure 26: Leading providers of guaranteed acceptance whole-of-life plans, 2011
                                                                                          • Companies and Products

                                                                                            • Sun Life Direct
                                                                                                • Figure 27: New gross written premiums and investment contract deposits for AXA Wealth Limited, 2011
                                                                                              • Scottish Widows
                                                                                                • Aviva
                                                                                                  • LV=
                                                                                                    • Legal & General
                                                                                                      • Engage Mutual
                                                                                                      • Brand Communication and Promotion

                                                                                                        • Key points
                                                                                                          • Adspend on over-50s life protection up by 14% in the year to January 2012
                                                                                                            • Figure 28: Total advertising expenditure on life protection products, by product category, 2008-12
                                                                                                          • Sun Life Direct remains the number one advertiser of over-50s life insurance products
                                                                                                            • Figure 29: Top 15 advertisers of over-50s life insurance products, 2010-12
                                                                                                          • Direct mail accounts for 65% of over-50s life insurance adspend
                                                                                                            • Figure 30: Proportional distribution of adspend on over-50s life insurance products, by media type, 2010-12*
                                                                                                        • Channels to Market

                                                                                                          • Key points
                                                                                                            • Non-linked whole-of-life business driven by single-tie and non-intermediated distribution
                                                                                                              • Figure 31: New guaranteed acceptance plan and other non-linked whole-of-life premiums, by channel, 2007-11
                                                                                                              • Figure 32: Proportional distribution of new whole-of-life premiums, by channel – guaranteed acceptance plan versus other whole-of-life, 2010-11
                                                                                                            • Intermediaries dominate new linked whole-of-life business
                                                                                                              • Figure 33: New linked whole-of-life premiums, by channel, 2010-11
                                                                                                          • The Over-50s Consumer – Life Insurance Ownership

                                                                                                            • Key points
                                                                                                              • Under a quarter of over-50s have whole-of-life cover
                                                                                                                • Figure 34: Life insurance ownership, March 2012
                                                                                                              • Half of over-50s do not have any cover and many are unsure about their policy
                                                                                                                • Men are more likely to have some type of whole-of-life cover
                                                                                                                  • Figure 35: Life insurance ownership, by gender, March 2012
                                                                                                                • Guaranteed acceptance plan ownership can be boosted among over-75s
                                                                                                                  • Figure 36: Life insurance ownership, by age, March 2012
                                                                                                                • Consumers are most likely to have one type of insurance product
                                                                                                                  • Figure 37: Repertoire of life insurance ownership, March 2012
                                                                                                              • The Over-50s Consumer – Purchase Triggers

                                                                                                                • Key points
                                                                                                                  • Protecting family is the biggest motivator for buying life insurance
                                                                                                                    • Figure 38: Purchase triggers, March 2012
                                                                                                                  • Financial and working situation has an impact on buying motivation
                                                                                                                    • Figure 39: Purchase triggers, by working status and gross annual household income, March 2012
                                                                                                                  • Link between product ownership and purchasing triggers
                                                                                                                    • Figure 40: Purchase triggers, by life insurance ownership, March 2012
                                                                                                                • The Over-50s Consumer – Influencing Factors

                                                                                                                  • Key points
                                                                                                                    • Brand power and low premiums are most important to consumers
                                                                                                                      • Figure 41: Influencing factors, March 2012
                                                                                                                    • Simplicity and recommendations are also highly influential
                                                                                                                      • Low monthly premiums and an easy application process appeal to guaranteed acceptance plan holders
                                                                                                                        • Figure 42: Influencing factors, by life insurance ownership, March 2012
                                                                                                                      • No health and medical assessments appeal to customers covering funeral costs
                                                                                                                        • Figure 43: Influencing factors, by purchasing triggers, March 2012
                                                                                                                    • The Over-50s Consumer – Future Financial Arrangements

                                                                                                                      • Key points
                                                                                                                        • Two thirds of over-50s have made a will
                                                                                                                          • Figure 44: Future financial arrangements, March 2012
                                                                                                                        • There is some scepticism about insurance returns and payouts
                                                                                                                          • Consumer affluence has an impact on financial planning
                                                                                                                            • Figure 45: Future financial arrangements, by socio-economic grouping and gross annual household income, March 2012
                                                                                                                          • Whole-of-life policyholders more likely to have made a will and plans for funeral costs
                                                                                                                            • Figure 46: Future financial arrangements, by life insurance ownership, March 2012
                                                                                                                        • Appendix – Market Size and Forecast

                                                                                                                            • Figure 47: Best and worst case forecast for total value of new whole-of-life sales, 2012-17
                                                                                                                            • Figure 48: Best and worst case forecast for total volume of whole-of-life policies written, 2012-17
                                                                                                                        • Appendix – The Over-50s Consumer – Life Insurance Ownership

                                                                                                                            • Figure 49: Life insurance ownership, by demographics, March 2012
                                                                                                                            • Figure 50: Repertoire of life insurance ownership, by demographics, March 2012
                                                                                                                        • Appendix – The Over-50s Consumer – Purchase Triggers

                                                                                                                            • Figure 51: Purchase triggers, by demographics, March 2012
                                                                                                                        • Appendix – The Over-50s Consumer – Influencing Factors

                                                                                                                            • Figure 52: Influencing factors, by demographics, March 2012
                                                                                                                        • Appendix – The Over-50s Consumer – Future Financial Arrangements

                                                                                                                            • Figure 53: Future financial arrangements, by demographics, March 2012

                                                                                                                        Companies Covered

                                                                                                                        • Ageas
                                                                                                                        • Aviva Plc
                                                                                                                        • AXA UK plc
                                                                                                                        • Barclays Bank plc
                                                                                                                        • Clydesdale Bank
                                                                                                                        • Dignity Plc
                                                                                                                        • engage Mutual Assurance
                                                                                                                        • Foresters Friendly Society
                                                                                                                        • HBOS plc (Halifax Bank of Scotland)
                                                                                                                        • Homeowners Friendly Society
                                                                                                                        • Legal & General Group PLC
                                                                                                                        • Lloyds Banking Group
                                                                                                                        • Lloyds TSB Insurance
                                                                                                                        • LV=
                                                                                                                        • Nationwide Building Society
                                                                                                                        • NatWest
                                                                                                                        • Newcastle Building Society Limited
                                                                                                                        • Norwich & Peterborough Building Society
                                                                                                                        • Scottish Widows Bank plc
                                                                                                                        • Skipton Building Society
                                                                                                                        • St Andrew's Group
                                                                                                                        • Standard Life Assurance Company
                                                                                                                        • Swiss Re
                                                                                                                        • The Benenden Healthcare Society Limited

                                                                                                                        Whole of Life Insurance - UK - May 2012

                                                                                                                        £1,995.00 (Excl.Tax)