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Whole of Life Insurance - UK - November 2010

Report findings:

  • In terms of new business, it’s a story of two halves. The non-linked (mainly guaranteed acceptance plan) market is faring very well, with sales having risen strongly over the past five years.
  • Demand for unit-linked policies has fallen due to changes to the IHT rules benefiting married couples and civil partners, and reduced adviser support.
  • Demand for guaranteed acceptance plans will continue to increase, because of factors such as an expanding over-50s population and rising funeral costs.
  • Online sales are also set to grow strongly, as broadband take-up among the target market increases and as more web aggregators cover the market.
  • Less than half (45%) of UK over-50s have life cover. However, there is significant consumer confusion over the type of policy owned, with 15% not sure whether they have a whole-of-life or term policy.
  • There is huge scope to expand the guaranteed acceptance plan market, by taking advantage of new distribution opportunities (eg bancassurers and web aggregators) and the potential to link-up with other products (eg funeral plans, will writing services, packaged current accounts).

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Table of contents

  1. Issues in the Market

      • Key issues
        • Product background
          • Figure 1: Comparative summary of the two main sectors of the whole-of-life insurance market
        • Tax benefits
          • Market definitions
            • Abbreviations
            • Future Opportunities

                • Trend: No Resting Place
                  • Trend: My Life, My Legacy
                  • Market in Brief

                    • The size of the market
                      • Market outlook
                        • Regulatory developments
                          • Competitive environment
                            • Leading brands
                              • Product development
                                • Distribution trends
                                  • Advertising activity
                                    • The key findings of Mintel’s consumer research
                                      • Buying motivation and influencing factors
                                        • Making arrangements for the future
                                        • Internal Market Environment

                                          • Key points
                                            • Benefits paid on life policies continue to exceed total net premium income
                                              • Figure 2: Total UK life insurance business – benefits paid and total net premium income, 2000-09
                                            • IHT changes reduce the appeal of investment-linked whole-of-life plans
                                              • Figure 3: Value of IHT transfers on death, 2003/04-2009/10
                                            • Lack of adviser support hinders take-up
                                              • Regulation round-up
                                                • RDR update
                                                  • What impact will the RDR have on the consumer?
                                                  • Broader Market Environment

                                                    • Key points
                                                      • Macroeconomic factors
                                                        • Steady recovery but conditions remain tough for consumers
                                                          • What impact will this have on the whole-of-life insurance sector?
                                                            • Demographic and social trends
                                                              • An expanding target market
                                                                • Figure 4: Trends in the UK total population, by age, 1970-2030
                                                              • Increasing longevity has exerted downward pressure on premiums
                                                                • Assumptions are made based on mortality statistics
                                                                  • Figure 6: Number of deaths in England and Wales, by age and gender, 2009
                                                                • Health and social activities of the over-50s
                                                                  • Less than a quarter of over-50s have a health problem or disability
                                                                    • Figure 7: Presence of long-term illness, health problems or disability – over-50s, by age group, 2010
                                                                  • Half of all over-50s eat a very healthy diet
                                                                    • Figure 8: Agreement with statements relating to diet and health – over-50s, by age group, 2010
                                                                  • Most adults aged 50-74 are fairly active
                                                                    • Figure 9: Frequency of exercise – over-50s, by age group, 2010
                                                                  • Two thirds of those aged 50-64 have broadband access
                                                                    • Figure 10: Internet and broadband penetration – over-50s, by age group, 2010
                                                                  • The funeral market
                                                                    • Rising funeral costs
                                                                      • Figure 11: Average cost of a funeral (including disbursements) in the UK, at current prices – UK, 2004-10
                                                                    • Downside of using savings to pay for a funeral
                                                                      • Social Fund shortfall
                                                                      • Competitive Context

                                                                        • Key points
                                                                          • Different life products serve different target markets
                                                                            • Term life insurance
                                                                              • Whole-of-life insurance
                                                                                • Demand for term assurance stabilises, while whole-of-life grows strongly
                                                                                  • Figure 12: Volume and value of new regular-premium life insurance business, by type of policy, 2005-09
                                                                                • Competition from funeral plans
                                                                                  • Figure 13: Number of funeral plan sales and number in force, UK, 2005-09
                                                                                • Leading funeral plan providers
                                                                                • SWOT Analysis – Guaranteed Acceptance Plans

                                                                                    • Figure 14: Guaranteed acceptance plan market – strengths, weaknesses, opportunities and threats, 2010
                                                                                • Who’s Innovating?

                                                                                  • Key points
                                                                                    • Guaranteed acceptance plans are evolving and converging
                                                                                      • Recent developments in the guaranteed acceptance plan market
                                                                                        • Rewarding healthy lifestyles
                                                                                          • Targeting ex-pats
                                                                                          • Trade Perspective

                                                                                              • About the participating companies
                                                                                                • The RDR effect
                                                                                                  • New distribution opportunities
                                                                                                    • Product evolution
                                                                                                      • Lack of awareness and understanding is not a problem in practice
                                                                                                        • The future’s bright
                                                                                                        • Market Size and Forecast

                                                                                                          • Key points
                                                                                                            • New business
                                                                                                              • Sales growth continues, albeit solely driven by the non-linked sector
                                                                                                                • Figure 15: Volume and value of new individual regular-premium whole-of-life insurance policies, 2001-10
                                                                                                              • A market of two halves
                                                                                                                • Figure 16: New regular-premium whole-of-life business, by product type, 2006-10
                                                                                                              • Average non-linked premiums depressed by rising price competition
                                                                                                                • Figure 17: Average annual premiums for new whole-of-life policies, by product type, 2006-10
                                                                                                              • Business in force
                                                                                                                • There are nearly ten million whole-of-life policies in force…
                                                                                                                  • Figure 18: Number of individual whole-of-life insurance policies in force, 2002-09
                                                                                                                • …including two million non-profit regular-premium policies
                                                                                                                  • Figure 19: Volume and value of regular-premium whole-of-life policies in force, by product type, 2005-09
                                                                                                                • Forecast of new business
                                                                                                                  • The market will continue to grow strongly…
                                                                                                                    • Figure 20: Forecast of total market volume – fan chart, 2006-15
                                                                                                                    • Figure 21: Forecast of total market value – fan chart, 2006-15
                                                                                                                  • …driven by the non-linked sector
                                                                                                                    • Figure 22: Forecast of new regular-premium individual whole-of-life business, by volume and value, 2006-15
                                                                                                                  • Fan chart explanation
                                                                                                                    • Forecast methodology
                                                                                                                    • Market Share

                                                                                                                      • Key points
                                                                                                                        • Top five provider rankings
                                                                                                                          • Figure 23: Top five individual product providers, by number of new individual whole-of-life sales, 2007-09
                                                                                                                        • Sun Life Direct continues to dominate the market
                                                                                                                          • Figure 24: Top five providers of individual whole-of-life insurance, based on new sales volumes, 2009
                                                                                                                          • Figure 25: Leading providers of guaranteed acceptance whole-of-life plans, 2010
                                                                                                                      • Companies and Products

                                                                                                                          • Sun Life Direct
                                                                                                                              • Figure 26: Key financial indicators for AXA Sun Life Plc, 2008 and 2009
                                                                                                                              • Figure 27: Key financial indicators for AXA’s life business segment, 2008 and 2009
                                                                                                                            • Aviva
                                                                                                                                • Figure 28: Key financial indicators for Aviva plc, 2008 and 2009 and H1 2009 and H1 2010
                                                                                                                                • Figure 29: Key financial indicators for Aviva’s Life segment, 2008 and 2009 and H1 2009 and H1 2010
                                                                                                                              • Scottish Widows
                                                                                                                                  • Figure 30: Key financial indicators for Scottish Widows Plc, 2008 and 2009
                                                                                                                                • LV=
                                                                                                                                    • Figure 31: Key financial indicators for LV= Group, 2008 and 2009
                                                                                                                                    • Figure 32: Key financial indicators for LV=’s life and health protection segment, 2008 and 2009
                                                                                                                                  • Engage Mutual
                                                                                                                                      • Figure 33: Key financial indicators for Engage Mutual Assurance, 2008 and 2009
                                                                                                                                    • Legal & General
                                                                                                                                        • Figure 34: Key financial indicators for Legal & General Group, 2008 and 2009 and H1 2009 AND H1 2010
                                                                                                                                    • Brand Communication and Promotion

                                                                                                                                      • Key points
                                                                                                                                        • Adspend on over-50s plans rose modestly in the 12 months to June 2010
                                                                                                                                          • Figure 35: Total advertising expenditure on life protection products, by product category, 2006-10
                                                                                                                                        • Sun Life Direct invests heavily in advertising to defend its number one position
                                                                                                                                          • Figure 36: Top 15 advertisers of over-50s life insurance products, 2008-10
                                                                                                                                        • Over-50s plan providers rely on direct marketing to generate sales and awareness
                                                                                                                                          • Figure 37: Proportional distribution of adspend on over-50s life insurance products, by media type, 2008-10
                                                                                                                                      • Channels to Market

                                                                                                                                        • Key points
                                                                                                                                          • IFAs are responsible for generating the lion’s share of linked whole-of-life business
                                                                                                                                            • Figure 38: New linked whole-of-life premiums, by channel, 2006-09
                                                                                                                                          • New bancassurance arrangements have helped boost sales of over-50s plans
                                                                                                                                            • Figure 39: New guaranteed acceptance plan and other non-linked whole-of-life premiums, by channel, 2006-09
                                                                                                                                            • Figure 40: Proportional distribution of new whole-of-life premiums, by channel – linked versus non-linked, 2007-09
                                                                                                                                          • Direct channels account for around three fifths of new guaranteed acceptance business
                                                                                                                                            • Figure 41: Proportional distribution of guaranteed acceptance plans, by channel, 2010
                                                                                                                                        • The Over-50s Consumer – Life Insurance Ownership

                                                                                                                                          • Key points
                                                                                                                                            • Survey background
                                                                                                                                              • More than half of over-50s have no life cover
                                                                                                                                                  • Figure 42: Ownership of life insurance and funeral plans, by age group, August 2010
                                                                                                                                                • Life insurance coverage declines sharply past state retirement age
                                                                                                                                                  • One in three insured over-50s do not know what type of cover they have
                                                                                                                                                    • Product overlap or consumer confusion?
                                                                                                                                                      • Figure 43: Ownership of life insurance and funeral plans – cross-analysis, August 2010
                                                                                                                                                    • Identifying the core target groups
                                                                                                                                                      • Figure 44: Target groups identified for the life insurance market, August 2010
                                                                                                                                                    • The typical whole-of-life policyholder
                                                                                                                                                    • The Over-50s Consumer – Buying Motivation

                                                                                                                                                      • Key points
                                                                                                                                                        • Life insurance is an emotive purchase
                                                                                                                                                            • Figure 45: Main reasons for buying life insurance, by type of insurance owned, August 2010
                                                                                                                                                          • Multiple reasons for buying life cover
                                                                                                                                                            • Figure 46: Main reasons for taking a life insurance policy, by main reasons for taking a life insurance policy, August 2010
                                                                                                                                                        • The Over-50s Consumer – Influencing Factors

                                                                                                                                                          • Key points
                                                                                                                                                            • A trusted and familiar brand is a major selling point for life insurers
                                                                                                                                                                • Figure 47: Top ten factors influencing choice of life policy/provider, August 2010
                                                                                                                                                              • Guaranteed acceptance plan holders are also keen on straightforward products with affordable monthly premiums
                                                                                                                                                                • Figure 48: Factors influencing choice of life policy/provider, by type of policy owned, August 2010
                                                                                                                                                              • Product choice is also influenced by the motivation to purchase
                                                                                                                                                                • Figure 49: Factors that influenced choice of particular policy or provider, by main reasons for taking a life insurance policy, August 2010
                                                                                                                                                            • The Consumer – Targeting Opportunities

                                                                                                                                                              • Key points
                                                                                                                                                                • Death: the last taboo
                                                                                                                                                                    • Figure 50: Agreement with statements about financial planning and protection, by age group, August 2010
                                                                                                                                                                  • More women than men have made a will
                                                                                                                                                                    • Figure 51: Agreement with statements about financial planning and protection, by gender and socio-economic group, August 2010
                                                                                                                                                                  • Single people are least likely to have made a will or funeral plans
                                                                                                                                                                    • Figure 52: Agreement with statements about financial planning and protection, by marital status, August 2010
                                                                                                                                                                  • Two fifths of over-50s with household incomes of £40K+ are interested in IHT mitigation
                                                                                                                                                                    • Figure 53: Agreement with statements about financial planning and protection, by gross annual household income, August 2010
                                                                                                                                                                  • A significant minority of insured over-50s have no will in place
                                                                                                                                                                    • Figure 54: Agreement with statements about financial planning and protection, by type of policy owned, August 2010
                                                                                                                                                                  • Further analysis
                                                                                                                                                                  • Appendix – Life Insurance Ownership

                                                                                                                                                                      • Figure 55: Ownership of life insurance and funeral plans, by demographics, August 2010
                                                                                                                                                                  • Appendix – Profile of Policyholders

                                                                                                                                                                      • Figure 56: Demographic profile of life insurance ownership groups, August 2010

                                                                                                                                                                  Companies Covered

                                                                                                                                                                  • Aegon UK
                                                                                                                                                                  • Asda Group Ltd
                                                                                                                                                                  • Association of British Insurers
                                                                                                                                                                  • Aviva Plc
                                                                                                                                                                  • AXA Sun Life
                                                                                                                                                                  • Bank of England
                                                                                                                                                                  • Bright Grey
                                                                                                                                                                  • Clydesdale Bank
                                                                                                                                                                  • Department of Health
                                                                                                                                                                  • Dignity Plc
                                                                                                                                                                  • Direct Line Group Limited
                                                                                                                                                                  • engage Mutual Assurance
                                                                                                                                                                  • Facebook, Inc.
                                                                                                                                                                  • Financial Services Authority (The)
                                                                                                                                                                  • Foresters Friendly Society
                                                                                                                                                                  • Fortis Insurance Limited
                                                                                                                                                                  • Friends Provident plc
                                                                                                                                                                  • Grupo Santander Central Hispano S.A.
                                                                                                                                                                  • Harlequins Rugby Union Club
                                                                                                                                                                  • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                                  • HM Revenue & Customs
                                                                                                                                                                  • Homeowners Friendly Society
                                                                                                                                                                  • HSBC Private Bank (UK) Limited
                                                                                                                                                                  • Kantar Media
                                                                                                                                                                  • Legal & General Group PLC
                                                                                                                                                                  • Liverpool Victoria Friendly Society Limited
                                                                                                                                                                  • Lloyds Banking Group
                                                                                                                                                                  • LV=
                                                                                                                                                                  • National Association of Funeral Directors
                                                                                                                                                                  • Nationwide Building Society
                                                                                                                                                                  • NatWest
                                                                                                                                                                  • Newcastle Building Society Limited
                                                                                                                                                                  • Norwich & Peterborough Building Society
                                                                                                                                                                  • Norwich Union
                                                                                                                                                                  • Principality Building Society
                                                                                                                                                                  • Prudential Financial, Inc
                                                                                                                                                                  • Resolution plc
                                                                                                                                                                  • Retirement Insurance Advisory Service (RIAS)
                                                                                                                                                                  • Royal Bank of Scotland Group plc
                                                                                                                                                                  • Royal London Group
                                                                                                                                                                  • Royal London Mutual Insurance Society
                                                                                                                                                                  • Saga Services (finance)
                                                                                                                                                                  • Scottish Friendly Assurance Society Ltd
                                                                                                                                                                  • Scottish Provident
                                                                                                                                                                  • Scottish Widows Bank plc
                                                                                                                                                                  • Skipton Building Society
                                                                                                                                                                  • St Andrew's Group
                                                                                                                                                                  • Standard Life Assurance Company
                                                                                                                                                                  • Swiftcover
                                                                                                                                                                  • Swiss Re
                                                                                                                                                                  • Tesco Personal Finance Limited
                                                                                                                                                                  • Winterthur Life UK Limited

                                                                                                                                                                  Whole of Life Insurance - UK - November 2010

                                                                                                                                                                  £1,995.00 (Excl.Tax)