Life and Protection Intermediaries - UK - October 2010
This report provides an overview of the key issues impacting the market for advisers who sell life and protection, specifically focusing on the sale of term assurance, income protection and critical illness. In addition to examining the wider economic, demographic and regulatory environment, the report details the recent market performance in each segment of the market. The final sections of the report reveal the results of Mintel’s exclusively commissioned IFA research survey, conducted by NMG.
- Increasing longevity and the ageing of the UK population could influence more people to think of purchasing life insurance as way to leave a legacy for children or grandchildren rather than as a way to protect a spouse or dependant.
- Allowing commissions on pure protection sales post RDR will lead to more retail investment advisers to also sell protection but it will also create more consumer confusion about the way advisers are remunerated.
- Although the development of online financial tools and information resources are allowing more consumers to educate themselves, the internet is also creating opportunities for IFAs to add value and differentiate themselves from standardized sources of advice.
- Indicating that many IFAs believe generating new business is going to remain difficult; half of IFAs surveyed said they plan to shift the balance of their business towards recurring income over the next 12 months.
- A number of big insurance providers have raised efforts to sell more of their life and protection products via direct or so-called ‘non-advised’ routes. In addition to the poor economy and lack of consumer education just under a third of IFAs cite low cost direct business as a key barrier to generating new protection business.
- In order to increase levels of consumer engagement in life and protection, intermediaries should consider toning down the level of seriousness and incorporate a more light-hearted tone when promoting their products and services.
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Table of contents
Issues in the Market
- Key issues
Future Opportunities
- No Resting Place
- My Life, My Legacy
- No Resting Place
Market in Brief
- Majority of life and protection business is intermediated
- Market size
- Term assurance
- Critical illness
- Income protection
- Continual decline in the number of directly authorised advisers
- Figure 1: Number of FSA directly authorised retail intermediary firms, by primary category+, June 2008-June 2010
- Life assurance and income protection gaps continue to widen
- Key economic and demographic influences on life and protection
- Low levels of consumer trust and a high degree of product confusion
- Commissions on protection to be allowed post-RDR
- Other key FSA and government-initiated changes
- Competitive context – internet both a threat and an opportunity
- Adspend on independent financial advice has declined
- Key IFA research survey results
- The IFA: Barriers to generating new life and protection business
- The IFA: Provider support
- The IFA: Future intentions
- The IFA: Opinions on legislation
- Majority of life and protection business is intermediated
Internal Market Environment
- Key points
- Lack of engagement and consumer confusion about protection
- Half of IFAs believe less jargon can help boost protection business
- Life assurance protection gap rises to £2.4 trillion in 2009…
- …and the income protection gap stalls at £190 million
- Continued adviser-provider collaboration can help to close the gap
- Negative press has dented image of some products
- Critical illness sales scripts approved for use by FSA and ABI
- Reform of the welfare system could push up demand for protection
- People have become more comfortable arranging insurance online
- Key points
Broader Market Environment
- Key points
- Timid economic recovery a mixed bag for the protection industry
- Housing market weakness remains
- Figure 2: Residential housing transactions (seasonally adjusted), Q2 2006-Q2 2010
- Increasing longevity a good thing for life providers
- Figure 3: Cohort life expectancy at age 60, by gender, 1981-2056
- Motivation behind term assurance purchase shifting as population ages
- Figure 4: UK population, by age band, 2008-33
- Rise in the number of self-employed bodes well for protection market
- Figure 5: Total workforce and employment figures, by gender, 2004-14
- Key points
Regulatory Environment
- Key points
- RDR requirements too much to handle for some IFA firms
- Changes to capital adequacy requirements planned for 2013
- Commission on pure protection sales to continue post-RDR
- Only 2% of FOS complaints are about IFAs
- Figure 6: Financial services firms complained about, by sector, 2006/07-2009/10
- FSA intends to raise FOS compensation limit to £150,000
- Personal indemnity cover may become more difficult for IFAs to obtain
- Key points
Competitive Context – Sources of Financial Advice
- Key points
- Friends and family the first port of call
- Figure 7: Trends for main sources of financial advice used, 2009 and 2010
- More using the internet to become their own advisers
- An opportunity for advisers to create an online presence
- Key points
Strengths and Weaknesses
- Figure 8: Life and protection market SWOT analysis, 2010
Who’s Innovating?
- Key points
- Fortis introduces online point of sale processing for protection
- Bupa overhauls online intermediary protection platform
- AEGON online individual protection tracking system
- Scottish Provident upgrades ‘Life Matrix’ adviser toolkit
- L&G introduces more flexibility to make selling protection easier
- Advised online protection sales via GetLifeRight.co.uk
- Compass launches ‘Unusual Risks’ insurance advice service
- Key points
Intermediary Marketplace
- Key points
- Number of directly authorised firms down by 17% since June 2008
- Figure 9: Number of FSA directly authorised retail intermediary firms, by primary category+, June 2008-June 2010
- RDR could encourage more to advise on protection products
- General insurance appointed representative numbers continue to climb
- Figure 10: Number of directly authorised financial advice firms, June 2008-June 2010
- Key points
Protection Market Size
- Key points
- Term assurance
- Modest growth expected by year-end 2010
- Figure 11: Volume and value of new individual regular-premium term assurance policy sales, 2002-10
- Three in five new policies sold not mortgage-related
- Figure 12: Volume and value of new individual regular-premium term assurance policy sales, by policy type, 2005-09
- Critical illness
- New business levels expected to continue to improve by end of 2010
- Figure 13: New individual CI sales, by volume and value, 2006-10
- 96% of new CI sales sold with other insurance
- Figure 14: New individual CI sales, by type, by volume and value, 2006-10
- Continued rise in protection-related term assurance CI rider sales
- Figure 15: New individual CI rider benefit sales, by volume and value and type of insurance, 2005-10
- Income protection
- Market growth projected to remain depressed in 2010
- Figure 16: New individual income protection sales, by volume and value, and average annual premiums, 2006-10
- Simplified products could help going forward
- Key points
Distribution Overview
- Key points
- Most life and protection products sold with advice
- Some insurers looking to invest more in non-advised sales channels
- Term assurance
- IFAs dominate non-mortgage-related new business
- Figure 17: Total new premiums for individual regular-premium term assurance policies written, by distribution channel and policy type, 2005-10 (est)
- Critical illness
- 2010 first-half figures show 60% of new CI rider benefit IFA-generated
- Figure 18: Distribution of new individual CI rider benefit premiums, by channel, 2005-10 (H1)
- Standalone CI premiums mostly sold by IFAs
- Figure 19: Distribution of new individual standalone CI premiums, by channel, 2005-10 (H1)
- Income protection
- Over half of all new business will still be generated via IFAs in 2010
- Figure 20: New individual sales of income protection policies, by distribution channel, 2008 and 2009
- Key points
Key Players
- The Tenet Group
- Figure 21: Financial performance of Tenet Group Limited, 2008 and 2009
- Sesame Bankhall Group
- Figure 22: Financial performance of Sesame Bankhall Group Limited, 2008 and 2009
- Openwork
- Figure 23: Financial performance of Openwork Limited, 2008 and 2009
- Intrinsic Financial Services
- Figure 24: Financial performance of Intrinsic Financial Services Limited, 2008 and 2009
- Personal Touch Financial Services
- Figure 25: Financial performance of Personal Touch Financial Services, 2008 and 2009
- The Tenet Group
Brand Communication and Promotion
- Key points
- Advertising financial advice to consumers
- Financial advice advertising continues to decline in 2010
- Figure 26: Overview of total adspend on financial advice services, 2008-10*
- Press and direct mail most commonly used media types
- Figure 27: Overview of media type used to advertise financial advice services, 2010*
- Advertising life protection products to intermediaries
- Life protection intermediary adspend up 40% in year to August 2010
- Figure 28: Amount spent on advertising in the life protection intermediary sector, 2008-10*
- Figure 29: Advertising expenditure to financial intermediaries, by sector, 2008-10
- Aviva life services top advertiser
- Figure 30: Top ten advertisers in the life protection intermediary sector, 2008-10*
- Key points
The IFA: Barriers to Generating New Life and Protection Business
- Key points
- Economy continues to be identified as the main barrier to new business
- Figure 31: The main barriers when it comes to trying to sell protection and life insurance products to clients, 2009 and 2010
- Lack of awareness and trust longer-term barriers
- Just under a third cite low-cost direct business as a key barrier
- Key points
The IFA: Provider Support
- Key points
- IFAs desire more simplified application and underwriting processes
- Figure 32: What insurers could do to make it easier for IFAs to sell protection products and life insurance to their clients, 2009 and 2010
- Increased product flexibility moves the agenda in 2010
- IFAs prefer to keep up with developments at provider events and online
- Figure 33: How IFAs prefer to keep up to date with developments in the life and protection markets, July 2009 and June 2010
- Key points
The IFA: Future Intentions
- Key points
- IFAs more confident of own prospects than those of financial services…
- Figure 34: IFA confidence about own business prospects and overall financial services market compared to six months prior, Q3 2010
- …but the period of rising confidence appears to have come to an end
- Figure 35: Confidence about own business prospects compared to six months prior, Q3 2009 and Q3 2010
- Half of IFAs shifting the balance of their business to recurring income
- Figure 36: IFA future plans over the next 12 months, Q3 2010
- Key points
The IFA: Opinions on Legislation
- Key points
- RDR support has grown but over two fifths still have a negative view
- Figure 37: Opinions on the impact of the Retail Distribution Review on IFA business, Q3 2009 and Q3 2010
- Over half of IFAs don’t believe TCF will have any impact on them
- Figure 38: Opinions on the impact of the Treating Customers Fairly initiative on IFA business, Q3 2009 and Q3 2010
- IFAs mostly indifferent to the Money Guidance initiative
- Figure 39: Opinions on the impact of the FSA’s Money Guidance initiative on IFA business, Q3 2009 and Q3 2010
- Key points
Life and Protection Intermediaries - UK - October 2010
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