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Description

Description

"The income protection market will be heavily hit by the COVID-19 outbreak in 2020. Distribution challenges and concern about the economy and unemployment will hit both demand and supply. Disruption to the housing market will be particularly damaging with mortgage transactions accounting for a large proportion of income protection sales. However, the pandemic will also lead to increased interest in the product and greater focus on financial resilience, which should be beneficial in the long term. Improving product flexibility will be vital in capitalising on this increased interest, particularly among self-employed and gig economy workers."

– Douglas Kitchen, Financial Services Analyst

This report will cover the following areas -

  • The impact of COVID-19 on income protection sales and market dynamics.
  • How COVID-19 will change consumer behaviour and attitudes towards income protection.
  • Ownership of different types of protection insurance and appetite for income protection.
  • Consumer interest in different product features and purchasing priorities.

What's included

What's included

Table of contents

Table of contents

  1. Overview

    • What you need to know
      • Key Issues Covered in this Report
        • Products covered in this Report
        • Executive Summary

            • The Market
              • Income protection sales to experience sharp drop in sales in 2020
                • Figure 1: Forecast of new individual (long-term) income protection sales, adjusted for COVID-19 – Fan chart 2014-24
              • Mortgage channels drive increased sales in 2019
                • Figure 2: New individual income protection sales and average premium, 2015-19
              • Total loans for house purchases fell in 2019
                • Figure 3: Volume of house purchase loans, by type of borrower, 2013-19
              • Impact of COVID-19 on the income protection market
                • Short term pain but long term gain
                  • Figure 4: Expected impact of COVID-19 on Income protection, short, medium and long term, [30 April 2020]
                • Companies and brands
                  • Providers react to COVID-19 outbreak
                    • Aviva dominates the market in 2018…
                      • …while Legal & General grow new sales by over 50%
                        • Figure 5: Estimated market shares of the top five providers of new individual income protection, based on volume sales, 2018
                      • LV= and Legal & General target the rental market
                        • New propositions for the self-employed
                          • IPTF introduces a new Seven Families Campaign
                            • The consumer
                              • One in 10 say they own income protection
                                • Figure 6: Protection product ownership, February 2020
                              • Pre-COVID-19 signs that financial resilience was improving
                                • Figure 7: Expected impact of loss of income on financial stability, February 2020
                              • A quarter of workers without cover would consider income protection
                                • Figure 8: Interest in income protection, February 2020
                              • Flexible policy terms are the most important benefit
                                • Figure 9: Important income protection policy features, February 2020
                              • Frequently changing lifestyles are a barrier to ownership
                                • Figure 10: Barriers to ownership of income protection, by interest in income protection, February 2020
                              • What we think
                              • The Impact of COVID-19 on Income Protection

                                • Short, medium and long-term impact on the industry
                                  • Figure 11: Expected impact of COVID-19 on Income protection, short, medium and long term, 30 April 2020
                                • Opportunities and Threats
                                  • Short term pain but long term gain
                                    • COVID-19 provides a focus for discussions about financial resilience
                                      • Reshaping the protection landscape
                                        • Wellbeing takes on new significance
                                          • Providers face a tricky balancing act in response to crisis
                                            • Impact on the income protection market
                                              • Sales will decline sharply in 2020, but recovery expected from 2021
                                                  • Figure 12: Forecast of new individual (long-term) income protection sales, adjusted for COVID-19 – Fan chart 2014-24
                                                • Shifts in consumer behaviour
                                                  • Household finances held up in April…
                                                    • Figure 13: The financial well-being index, January 2016-April 2020
                                                  • …but confidence in the year ahead dropped sharply
                                                    • Figure 14: The financial confidence index, January 2016-April 2020
                                                  • Impact on key consumer segments
                                                    • Higher income groups are more likely to weather the storm
                                                      • Self-employed workers are more likely to identify a need for post-COVID-19 cover
                                                        • Mortgage holders and parents will seek reassurance
                                                          • How a COVID-19 recession will reshape the industry
                                                            • Rising unemployment will damage prospects in the short-term
                                                              • A different type of recession for lenders…
                                                                • …and better prospects for a recovery for insurers
                                                                  • Impact on the Marketing Mix
                                                                    • Distribution strategies will change in light of COVID-19
                                                                      • Lockdown could prove the tipping point for remote advice channels
                                                                        • Flexible options needed to widen engagement
                                                                          • Scope for cheaper starter policies but comprehensive policies will still have a place
                                                                            • COVID-19: Market context
                                                                            • Issues and Insights

                                                                              • Providers face a balancing act when developing engagement in the wake of COVID-19
                                                                                • The facts
                                                                                  • The implications
                                                                                    • More distinction is needed between self-employed and gig economy worker needs
                                                                                      • The facts
                                                                                        • The implications
                                                                                        • The Market – What You Need to Know

                                                                                            • The mortgage market drives increased sales in 2019
                                                                                              • Total loans for house purchases falls
                                                                                                • Less than 20% are covered until retirement
                                                                                                  • IPTF introduces a new Seven Families Campaign
                                                                                                  • Market Size and Forecast

                                                                                                    • Strong increase in sales in 2019
                                                                                                      • Figure 15: New individual income protection sales and average premium, 2015-19
                                                                                                    • Group contracts continue to perform strongly
                                                                                                      • Figure 16: Volume and value of new group income protection sales, 2015-19
                                                                                                    • COVID-19 market forecast
                                                                                                      • The market is expected to recover from an initial decline
                                                                                                        • Figure 17: Forecast of new individual (long-term) income protection sales, adjusted for COVID-19 – Fan chart 2014-24
                                                                                                        • Figure 18: Forecast of new individual (long-term) income protection sales, adjusted for COVID-19 – Fan chart 2014-24
                                                                                                        • Figure 19: Forecast of new individual (long-term) income protection premiums, adjusted for COVID-19 – Fan chart 2014-24
                                                                                                        • Figure 20: Forecast of new individual (long-term) income protection premiums, adjusted for COVID-19 – Fan chart 2014-24
                                                                                                      • Pre-COVID-19 forecast: market forecast to continue recent growth
                                                                                                        • Figure 21: Forecast of new individual (long-term) income protection sales – Fan chart 2014-24
                                                                                                        • Figure 22: Forecast of new individual (long-term) income protection sales, 2014-24
                                                                                                        • Figure 23: Forecast of new individual (long-term) income protection premiums – Fan chart 2014-24
                                                                                                        • Figure 24: Forecast of new individual (long-term) income protection premiums, 2014-24
                                                                                                      • Forecast methodology
                                                                                                      • Channels to Market

                                                                                                        • Independent channels increase their market share
                                                                                                          • Restricted and non-advised sales also increased in 2019
                                                                                                            • Figure 25: Distribution of new individual (long-term) income protection premiums and contracts, 2015-19
                                                                                                          • The bancassurance market remains static
                                                                                                            • Figure 26: Value of new income protection (long-term) bancassurance premiums, 2015-19
                                                                                                        • Market Drivers

                                                                                                          • Total loans for house purchases falls for the second consecutive year
                                                                                                            • Figure 27: Volume of house purchase loans, by type of borrower, 2013-19
                                                                                                          • Sales through mortgage channels were on the rise
                                                                                                            • Figure 28: New sales of income protection products, by FCA firm type, 2016- 2019
                                                                                                          • The self-employed population continues to grow
                                                                                                            • Figure 29: UK percentage growth for employees and self-employed men and women aged 16 and over, 2010-20
                                                                                                          • Earnings continue to outpace inflation
                                                                                                            • Figure 30: Average weekly earnings growth vs inflation, January 2010-January 2020
                                                                                                          • Over 90% of policies have a five-year benefit term
                                                                                                            • Figure 31: Income protection policies, by benefit term, 2018
                                                                                                          • Number of new claims paid doubles in 2018
                                                                                                            • Figure 32: Number of new claims paid vs average value of new claims paid, 2015-18
                                                                                                        • Regulatory and Legislative Changes

                                                                                                          • IPTF unveils a new Seven Families Campaign
                                                                                                            • The FCA warns against penalising customers following COVID-19
                                                                                                              • Further clarification required over Universal Credit and income protection
                                                                                                              • Companies and Brands – What You Need to Know

                                                                                                                  • Aviva dominated the market in 2018…
                                                                                                                    • …while Legal & General grew new sales by half
                                                                                                                      • LV= and Legal & General target the rental market
                                                                                                                        • New propositions for the self-employed
                                                                                                                          • Providers enhance affordability and flexibility
                                                                                                                          • Market Share

                                                                                                                            • Aviva continues to dominate the market
                                                                                                                              • Legal & General increases new sales by 50% to take second place
                                                                                                                                • LV= grows new income protection business by one fifth in 2019
                                                                                                                                  • Figure 33: Estimated market shares of the top five providers of new individual income protection, based on volume sales, 2018
                                                                                                                                  • Figure 34: Gross earned premiums of the top individual income protection providers, 2018
                                                                                                                                • The Exeter continues to lead the way among Friendly Societies
                                                                                                                                • Competitive Strategies

                                                                                                                                  • New propositions target the rental sector…
                                                                                                                                    • …and the self-employed
                                                                                                                                      • Increased access for mental health patients
                                                                                                                                        • Providers increase affordability and flexibility
                                                                                                                                          • New enhancements for NHS workers
                                                                                                                                            • New solution enables advisers to compare benefits better
                                                                                                                                            • The Consumer – What You Need to Know

                                                                                                                                              • One in 10 say they own income protection
                                                                                                                                                • Pre-COVID-19 signs that financial resilience was improving
                                                                                                                                                  • Flexible policy terms are the most important benefit
                                                                                                                                                    • Regularly changing lifestyles are a barrier to ownership
                                                                                                                                                      • Affordability is the major issue for the less financially resilient
                                                                                                                                                      • Protection Product Ownership

                                                                                                                                                        • Income protection remains the third most popular type of cover
                                                                                                                                                          • Figure 35: Protection product ownership, February 2020
                                                                                                                                                        • Ownership of protection much higher among those with significant savings
                                                                                                                                                          • Figure 36: Protection product ownership, by level of savings and investments, February 2020
                                                                                                                                                      • Expected Impact of Loss of Income on Finances

                                                                                                                                                        • Pre-COVID-19 signs that financial resilience was improving
                                                                                                                                                          • Younger Millennials and renters are the most vulnerable
                                                                                                                                                            • Figure 37: Expected impact of loss of income on financial stability, February 2020
                                                                                                                                                          • Self-employed workers show some resilience
                                                                                                                                                            • Figure 38: Expected impact of loss of income on financial stability, February 2020
                                                                                                                                                        • Interest in Income Protection

                                                                                                                                                          • One in four would consider income protection
                                                                                                                                                            • Figure 39: Interest in income protection, February 2020
                                                                                                                                                          • Long-term policies remain the preferred option…
                                                                                                                                                            • Figure 40: Preferred length of income protection policy, February 2020
                                                                                                                                                          • …even among those who require short-term cover
                                                                                                                                                            • Figure 41: Preferred length of income protection policy, by expected loss of income on financial stability, February 2020
                                                                                                                                                        • Important Policy Factors

                                                                                                                                                          • Flexible policy terms are highlighted as the most important…
                                                                                                                                                            • …but people are looking for more from their policy
                                                                                                                                                              • Parents prioritise additional cover for family
                                                                                                                                                                • Figure 42: Important income protection policy features, February 2020
                                                                                                                                                              • Quality comes before price
                                                                                                                                                                • Figure 43: Important factors when choosing income protection, February 2020
                                                                                                                                                            • Barriers to Ownership of Income Protection

                                                                                                                                                              • Frequently changing circumstances are a major obstacle
                                                                                                                                                                • A lack of understanding is a barrier to entry
                                                                                                                                                                  • Figure 44: Barriers to ownership of income protection, by interest in income protection, February 2020
                                                                                                                                                                • Barriers reflect level of financial resilience
                                                                                                                                                                  • Figure 45: Barriers to ownership of income protection, by expected impact of loss of income on financial stability, February 2020
                                                                                                                                                              • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                                  • Abbreviations
                                                                                                                                                                    • Consumer research methodology
                                                                                                                                                                    • Appendix – Market Size and Forecast

                                                                                                                                                                        • Figure 46: Forecast of new individual (long-term) income protection sales (pre-COVID-19), 2019-24
                                                                                                                                                                        • Figure 47: Forecast of new individual (long-term) income protection premiums (pre-COVID-19), at current and constant prices, 2019-24
                                                                                                                                                                      • Forecast methodology

                                                                                                                                                                      About the report

                                                                                                                                                                      This report will give you a complete 360-degree view of your market. Not only is it rooted in robust proprietary and high-quality third-party data, but our industry experts put that data into context and you’ll quickly understand:

                                                                                                                                                                      • The Consumer

                                                                                                                                                                        What They Want. Why They Want It.

                                                                                                                                                                      • The Competitors

                                                                                                                                                                        Who’s Winning. How To Stay Ahead.

                                                                                                                                                                      • The Market

                                                                                                                                                                        Size, Segments, Shares And Forecasts: How It All Adds Up.

                                                                                                                                                                      • The Innovations

                                                                                                                                                                        New Ideas. New Products. New Potential.

                                                                                                                                                                      • The Opportunities

                                                                                                                                                                        Where The White Space Is. How To Make It Yours.

                                                                                                                                                                      • The Trends

                                                                                                                                                                        What’s Shaping Demand – Today And Tomorrow.

                                                                                                                                                                      Please Note: This is a sample report. All of the figures, graphs, and tables have been redacted.

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