Most UK workers lack any form of income protection. Yet 59% expect to face financial hardship within six months of not working due to an unexpected illness and a further…
UK
Insurance
simple
UK Income Protection Market Report 2026
"Despite strong sales, there remains a significant income protection gap. Tackling this requires innovation and renewed effort to improve consumer understanding."
Sarah Hitchcock, Associate Consultant – Financial Services
UK Income Protection Industry – Trends and Insights
Most UK workers lack any form of income protection. Yet 59% expect to face financial hardship within six months of not working due to an unexpected illness and a further 15% have no idea how long they would manage for. Sales of income protection have grown strongly since the pandemic, and yet a substantial protection gap remains.
The Financial Conduct Authority (FCA) has made narrowing the gap a key area of focus as part of its ongoing market study into the protection market. With the help of stakeholders, the regulator plans to explore ways of harnessing digital technology, and using targeted support, to improve understanding and access to products that financially protect individuals and families from a loss of income due to illness. This presents a major opportunity for the industry; it will lead to increased consumer engagement and will help convert the 34% of uninsured workers who express interest in buying an income protection policy.
Alongside these positive developments, the regulator has also shone a light on the lower claims ratios on income protection versus other protection products. While the FCA acknowledges there may be good reasons for this, providers must closely monitor and review claims data to ensure fair value, and to mitigate the risk of future intervention.
This Report Looks at the Following Areas:
Recent market performance and expected performance over the next five years, by gross written premium (GWP) and volume of new sales.
Market drivers and regulatory developments.
Key provider market share, recent market movements and product innovation.
Ownership of income protection by UK consumers and motivations for taking out cover.
Financial resilience of non-policyholders and interest in getting income protection.
Amount prospective buyers are prepared to pay in premiums versus the amount policyholders are paying.
Policyholder satisfaction, understanding, and attitudes to enhanced cover benefits.
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EXECUTIVE SUMMARY
What you need to know
Outlook for the individual income protection market
Opportunities
Super-apps combined with guidance features could prove the answer to the “advice” dilemma
Remind advisers of the value of LPT’s inclusion in their toolkit
Increasing digitisation provides opportunities to target key groups, nudge procrastinators and simplify journeys
THE MARKET
Snapshot – market size and forecast
Consumers and the economic outlook
Main market drivers
Sales have more than doubled in a decade
Graph 1: volume of new individual income protection policy sales, 2016-25
Recent years have seen a shift towards shorter benefit terms
Average premiums have fallen, reflecting a shift towards cheaper forms of cover
Graph 2: average new individual income protection premium, 2016-25
Limited benefit policies also popular with employers
Rising cost pressures heighten the need for inflation-proofing cover
Graph 3: volume and value of new individual income protection claims paid, 2019-24
A higher claim rejection rate puts trust in jeopardy
Graph 4: claims acceptance rate* for individual income protection, 2019-24
Advisers generate the majority of income protection sales
Aviva and L&G are the largest providers of individual income protection
Graph 5: market shares of top five providers of individual income protection*, 2023-24
Income protection market set for continued strong growth
Graph 6: volume of new individual income protection policy sales – fan chart, 2019-30
Value of new business also expected to rise at a healthy rate
Graph 7: value of new individual income protection premiums – fan chart, 2019-30
FCA’s renewed focus on narrowing the protection gap will drive innovation and growth
THE CONSUMER
How to grow product ownership
Most UK workers fail to protect their income
Improve uptake and retention rates among those in middle age
Under-represented groups need specific targeting
Graph 8: ownership of long or short-term income protection*, by gender, employment and household income status, 2026
Convert interest into action by understanding motivation
A change in circumstance or lifestage event can prompt a sale
Relatable scenarios will improve the effectiveness of advertising and social media campaigns
Providing peace of mind to those concerned about the prospect of ill-health is a powerful driver
Most people would struggle financially within six months of not working
Engage, inform and nudge the non-insured
Scope to expand the market
Strong interest shown by younger adults
Guide people to strengthen their financial resilience
LPT can more effectively compete with general insurance solutions
Many people are confused about the different cover types
Offer optional enhanced benefits to upsell cover
Most customers are paying £30 a month or less for their cover
Graph 9: amount of monthly premium being paid by customers versus amount prospective customers would be willing to pay, 2026
Half of prospective customers are only willing to pay £20 or less a month
Significant interest in paying extra for full cover
Popularity of enhanced benefits highlights upselling opportunity
INNOVATION AND MARKETING
Providers seek to improve coverage, access and flexibility
National Friendly gains a new partner and launches adviser campaign
APPENDIX
Report scope and market definition
Other related products
The market
Market size – underlying data
Forecast methodology
Forecast methodology – fan chart
Market size and forecast of individual income protection
Market forecast and prediction intervals: value
Market forecast and prediction intervals: volume
The consumer
Consumer research questions
Consumer research methodology
UK generation groups
Abbreviations
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