2021
9
UK Critical Illness Cover Market Report 2021
2021-03-17T03:04:12+00:00
OX1042497
2195
135586
[{"name":"Insurance","url":"https:\/\/store.mintel.com\/industries\/finance\/financial-services\/insurance"}]
Report
en_GB
“Disruption caused by the COVID-19 outbreak led to a sharp decline in critical illness sales during 2020. However, the pandemic has led more people to actively consider their financial resilience,…

UK Critical Illness Cover Market Report 2021

£ 2,195 (Excl.Tax)

Report Summary

Providing the most comprehensive and up-to-date information and analysis of the UK Critical Illness Cover market, including the behaviours, preferences and habits of the consumer.

Despite the COVID-19 pandemic increasing awareness of critical illness cover, the general public awareness of critical illness cover remains low. Only 27% of adults would consider taking it out in the future, and while that is a 6% increase on 2019, customer understanding and trust in companies will limit this growth.

Sales of critical illness cover dropped at the start of the pandemic, decreasing by 15.2% to £249 million. The market is predicted to recover to pre-pandemic levels by 2023 because of the economic uncertainty coming out of lockdown, but the increased bad press may cause problems for companies.

Public trust in insurance companies remains low, especially thanks to coverage in the press about pay-outs for business, travel and wedding insurance lowering overall perception of the sector. In order to improve their image and sales, companies providing critical illness coverage will have to address the overcomplication of policies and general lack of public knowledge about the product.

Quickly understand

  • The impact of COVID-19 on the critical illness cover market.
  • The size of the critical illness cover market.
  • Ownership and interest in critical illness cover.
  • Consumers’ perception of financial resilience, and sources of funding if people were unable to work due to ill-health.
  • Purchase triggers for critical illness cover.
  • Preferred channels used when taking out critical illness cover.
  • Knowledge and understanding of critical illness cover.

Covered in this report

Policy Types: Standalone, mortgage term rider, other term rider.

Brands: Scottish Widows, AIG, LV=, Legal and General, Tenant Shop Financial Services, Aviva, Royal London, Zurich, VitalityLife.

Expert analysis from a specialist in the field

Written by Douglas Kitchen, a leading analyst in the Health sector, his extensive knowledge delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

Disruption caused by the COVID-19 outbreak led to a sharp decline in critical illness sales during 2020. However, the pandemic has led more people to actively consider their financial resilience, leading to heightened interest in the product. Providers have worked hard to simplify policies and break out of the ‘conditions race’ but more needs to be done to increase awareness and understanding of critical illness cover if the market is to truly bounce back after a difficult year.

Douglas Kitchen
Financial Services Analyst

Table of Contents

  1. Overview

    • Key issues covered in this Report
    • COVID-19: Market context
    • Economic and other assumptions
    • Products covered in this Report
  2. Executive Summary

    • Impact of COVID-19 on the protection market
      • Figure 1: Short-, medium- and long-term impact of COVID-19 on critical illness cover, March 2020
    • The market
    • Premiums decline in 2020
      • Figure 2: New individual critical illness policies and premiums, 2015-20
    • Market will return to 2019 levels in 2023
      • Figure 3: Market size and forecast of new individual critical illness premiums, at current prices, 2015-25
    • Differing fortunes for critical illness sold as a rider, and standalone policies
      • Figure 4: Market segmentation, 2016-20
    • Non-advised sales grow in importance among standalone policies
      • Figure 5: Channels to market for new critical illness policies, by market segmentation, 2020
    • Total property transactions fall in 2020
      • Figure 6: UK residential property transactions over £40,000, 2015-20
    • Increased waiting times leads to falling claims
      • Figure 7: Percentage of patients in England waiting over six weeks for diagnostic tests and procedures, October 2019-December 2020
    • Companies and brands
    • Legal & General remained the market leader despite a decline in sales in 2019
    • 2020 sees a dramatic shift away from the ‘conditions race’…
    • … and greater focus on children’s critical illness cover
    • The consumer
    • Little change in ownership in 2020…
      • Figure 8: Protection product ownership, December 2019 V December 2020
    • …and in perceptions of financial resilience
      • Figure 9: Financial Resilience, December 2019 V December 2020
    • Increasing reliance on savings and sick pay
      • Figure 10: How people would fund a period of illness or disability, December 2019 V December 2020
    • Consideration increases in 2020
      • Figure 11: Consideration of critical illness cover, December 2019 V December 2020
    • Financial advice and moving home are the main triggers for purchasing cover
      • Figure 12: Critical illness cover purchase triggers, December 2020
    • Those who are considering cover risk waiting until it is too late
      • Figure 13: Potential critical illness purchase triggers, December 2020
    • Online financial advice is more of a factor for those very likely to take out cover
      • Figure 14: Preferred channels when taking out a critical illness policy, December 2020
    • Greater understanding is required
      • Figure 15: Attitudes towards critical illness cover, December 2020
  3. Issues and Insights

    • COVID-19 drives an interest in critical illness cover
    • Overcoming trust issues demands new thinking
    • Simplification can future-proof the product
  4. The Market – Key Takeaways

    • Critical illness sales fall in 2020…
    • …but standalone policy sales increase
    • Claims are expected to fall sharply
  5. Market Size and Forecast

    • Impact of COVID-19 on Critical Illness Cover
      • Figure 16: Short-, medium- and long-term impact of COVID-19 on critical illness cover, March 2020
    • A hugely challenging year leads to a sharp decline in premiums
      • Figure 17: New individual critical illness policies and premiums, 2015-20
    • Growth is forecast to return in 2021
      • Figure 18: Market size and forecast of new individual critical illness premiums, at current prices, 2015-25
      • Figure 19: Market size and forecast of new individual critical illness premiums, at current prices, 2015-25
    • Market drivers and assumptions
    • Learnings from the last recession
      • Figure 20: Total new individual critical illness premiums, at current prices, 2007-12
    • Forecast methodology
  6. Market Segmentation

    • Mortgage term and other term policies decline sharply…
    • …but standalone policies have increased by almost a fifth
      • Figure 21: Market segmentation, 2016-20
    • The cross-sell rate falls sharply for other term policies
      • Figure 22: Critical illness rider cross-sell rate, 2016-20
  7. Channels to Market

    • Increased reliance on independent advice in 2020…
      • Figure 23: Channels to market for new critical illness policies, 2016-20
    • …due to mortgage term and other term linked policies
      • Figure 24: Channels to market for new critical illness policies, by market segmentation, 2020
  8. Market Drivers

    • A sharp fall in property transactions in 2020
      • Figure 25: UK residential property transactions over £40,000, 2015-20
    • NHS waiting times increase dramatically
      • Figure 26: Percentage of patients in England waiting over six weeks for diagnostic tests and procedures, October 2019-December 2020
    • Claims are expected to have fallen sharply in 2020
    • COVID-19 was the leading cause of death in 2020
      • Figure 27: Top 10 leading causes of death in the UK from 1 January to 31 December 2020
    • A period of high unemployment will harm the market
      • Figure 28: Annual unemployment rate, 2015-25
  9. Companies and Brands – Key Takeaways

    • The race for simplicity steps up
    • Greater focus on children’s critical illness cover
    • Improved access for renters
  10. Market Share

    • Despite a decline, Legal & General remains the market leader
    • Aviva grows sales in first half of 2020
    • Zurich increases sales in 2019
    • Vitality and Royal London see a decline in new business
      • Figure 29: Volume sales and market shares of the top five providers of new individual critical illness cover, 2018 and 2019
  11. Competitive Strategies

    • 2020 signifies a shift toward simplicity
    • Scottish Widows completely overhauls its proposition
    • Vitality reacts to concerns about over-complexity
    • AIG announces it has exited the ‘conditions race’
    • Brands introduce a raft of children’s critical illness enhancements
    • Scottish Widows unveils its ‘mini body’ image
    • LV= adds enhanced children’s cover to its flexible protection plan
    • Royal London introduces a new ‘conversion option’
    • Improved access for renters
  12. The Consumer – Key Takeaways

    • The high level of financial resilience might be overstated
    • COVID-19 increases interest in critical illness cover
    • Encourage people to take action before it’s too late
    • Improving knowledge and understanding should be a priority
  13. Impact of COVID-19 on Consumer Behaviour

    • 17% are financially better off than they were at the start of the outbreak
      • Figure 30: Change in financial situation since the COVID-19 outbreak, November 2020
    • Increase in financial confidence in 2021
      • Figure 31: The financial confidence index, January 2015-February 2021
    • Increased focus on protecting friends and family
      • Figure 32: Change in priority of staying in touch with friends/family since the COVID-19 outbreak, 4-12 February 2021
  14. Protection Product Ownership

    • Little change in ownership in 2020
      • Figure 33: Protection product ownership, December 2019 V December 2020
    • Reaching non-mortgage holders remains a challenge
      • Figure 34: Ownership of critical illness cover, by housing situation, December 2020
  15. Financial Resilience

    • COVID-19 has done little to change perspectives
      • Figure 35: Financial Resilience, December 2019 V December 2020
    • Gen Xers and Baby Boomers are most likely think they will manage
      • Figure 36: Financial Resilience, by generation, December 2020
  16. Sources of Funding for Lost Income

    • Increased reliance on savings…
    • …and sick pay
      • Figure 37: How people would fund a period of illness or disability, December 2019 V December 2020
    • Millennials are more likely to rely on less reliable sources
      • Figure 38: How people would fund a period of illness or disability, by generation, December 2020
  17. Consideration of Critical Illness Cover

    • Significant increase in consideration in 2020
      • Figure 39: Consideration of critical illness cover, December 2019 V December 2020
    • Financial resilience brings consideration
      • Figure 40: Consideration of critical illness cover, by financial resilience, December 2020
    • Those who would rely on debt are most likely to take out cover
      • Figure 41: Consideration of critical illness cover, by source of funding of lost income, December 2020
  18. Purchase Triggers for Critical Illness Cover

    • Advice and moving home are the main triggers for purchasing cover
      • Figure 42: Critical illness cover purchase triggers, December 2020
  19. Potential purchase triggers for Critical Illness Cover

    • Those who consider cover may wait until it’s too late…
      • Figure 43: Potential purchase triggers for critical illness cover, December 2020
    • …particularly among the less resilient
      • Figure 44: Potential purchase triggers for critical illness cover, by financial resilience, December 2020
    • Traditional triggers are more of a factor for those very likely to take out cover
      • Figure 45: Potential purchase triggers for critical illness cover, by consideration of critical illness cover, December 2020
    • Moving home not a trigger for renters
  20. Preferred Channels to Market

    • Online financial advice is more important for those very likely to take out cover…
    • …and are also more amenable to the prospect of using their main bank
    • Those who are less likely to consider cover will turn to direct channels
      • Figure 46: Preferred channels when taking out a critical illness policy, December 2020
  21. Attitudes towards Critical Illness Cover

    • Over half find policies hard to understand
    • A lack of trust is holding people back
      • Figure 47: Attitudes towards critical illness cover, December 2020
    • Critical illness cover is perceived to be more important than before
      • Figure 48: Agreement with attitudes towards critical illness cover, by ownership and interest in critical illness cover December 2020
  22. Appendix – Data Sources, Abbreviations and Supporting Information

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

    • Market forecast methodology
      • Figure 49: Best and worst forecast for value sales of critical illness cover, 2020-25

About the report

This market report provides in-depth analysis and insight supported by a range of data. At the same time, introductory and top-level content is provided to give you an overview of the issues covered.

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