2021
9
UK Income Protection Market Report 2021
2021-05-12T04:31:11+01:00
OX1045425
2195
137994
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Report
en_GB
“COVID-19 brought to an end the extended period of rising new income protection sales, but an improving operating environment will enable a return to growth in 2021. Nevertheless, the market…

UK Income Protection Market Report 2021

£ 2,195 (Excl.Tax)

Description

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

While 2020 had been expected as a strong year of growth in the income protection market, the COVID-19 lockdowns saw a sharp decrease in both demand and sales. Despite the 16% growth in new policy sales in 2019, with so much of the market reliant on mortgage related referrals, the sudden stalling of the housing market saw a sharp decline in income protection sales.

The short term prospects for the market remain negative, with the economic uncertainties thanks to furloughing, job loss and loss of income meaning many consumers will be unwilling to purchase unnecessary discretionary purchases such as income protection.

However, the pandemic has also created more awareness over the vulnerabilities many people have to lengthy periods without work or consistent income. This gives many income protection brands the opportunity to tap into a previously inaccessible market, tailoring new product development to help the self employed who often are more in need of the service.

Read on to discover more details or take a look at all of our UK Financial Services market research.

Quickly understand

  • 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.

Covered in this report

Products: Income protection, Accident, sickness and unemployment insurance, Personal accident and sickness insurance, Unemployment cover, Mortgage payment protection insurance, Critical illness cover, Life insurance.

Brands: Aviva, Legal & General, LV=, Royal London, The Exeter, IPTF, Starling Bank, Anorak, Create Insurance, Vitality, Cirencester Friendly, British Friendly, Holloway Friendly, Collective Benefits, iPipeline, NHS.

Expert analysis from a specialist in the field

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

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.

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
    • Income protection
    • Accident, sickness and unemployment insurance
    • Personal accident and sickness insurance
    • Unemployment cover
    • Mortgage payment protection insurance
    • Critical illness cover
    • Life insurance
  2. Executive Summary

    • Impact of COVID-19 on income protection
      • Figure 1: Short, medium and long-term impact of COVID-19 on income protection, April 2021
    • The market
    • An extended period of growth comes to an end…
    • …but the market is set to recover from 2021
      • Figure 2: Market size and forecast for sales of new individual protection policies, by value, 2015-25
      • Figure 3: Market size and forecast for sales of new individual protection policies, by volume, 2015-25
    • 69% of new business sold via IFAs in 2020
    • New schemes helping to support demand for mortgage lending
    • Government pressed to offer Universal Credit disregard to renters
    • Private rental market has expanded considerably
    • Companies and brands
    • Aviva retains position as market leader in 2019
    • Smaller players gaining market share
      • Figure 4: Market share of the leading providers of individual income protection policies, based on volume sales, 2019
    • Providers work to improve access via simpler underwriting and adviser support
    • New products launched to appeal to a wider target market
    • The consumer
    • A tenth of Britons own an income protection policy
      • Figure 5: Protection product ownership, December 2020
    • Two in five households would begin to struggle within six months of not working
      • Figure 6: Resilience of household finances, December 2020
    • No evidence that interest in income protection has risen during the pandemic
      • Figure 7: Interest in income protection products, February/December 2020
    • Just over two fifths of working adults say they are on statutory sick pay
      • Figure 8: Entitlement to sick pay, by age and gender, December 2020
    • Cost the main obstacle to policy purchase…
      • Figure 9: Barriers to purchase for income protection, December 2020
    • …but a lack of awareness is also plaguing the market
      • Figure 10: Barriers to purchase among those who are interested in taking out income protection insurance compared to all others, December 2020
    • Advisors play the key role in persuading consumers
      • Figure 11: Triggers for buying income protection insurance, December 2020
    • Hospitalisation benefit the most valued additional policy feature
      • Figure 12: Appealing features of an income protection policy, December 2020
  3. Issues and Insights

    • COVID-19-related challenges will linger even as pandemic subsides
    • New approaches to marketing required to reach the under-protected
  4. The Market – Key Takeaways

    • An extended period of growth comes to an end…
    • …but the market is set to recover from 2021
    • 69% of new business sold via IFAs in 2020
    • Government schemes helping to support demand for mortgage lending
    • An expanded private rental market offers untapped opportunities
    • Government pressed to offer Universal Credit disregard to renters
    • Rising unemployment will dent growth prospects
  5. Market Size and Forecast

    • An extended period of growth comes to an end due to COVID-19
      • Figure 13: Short, medium and long-term impact of COVID-19 on income protection, April 2020
    • Premiums dip in 2020
      • Figure 14: New individual income protection sales and average premium, 2016-20
    • The market is set to recover in 2021
      • Figure 15: Market size and forecast for sales of new individual protection policies, by value, 2015-25
      • Figure 16: Market size and forecast for sales of new individual protection policies, by value, 2015-25
    • Volume sales to recover more slowly
      • Figure 17: Market size and forecast for sales of new individual protection policies, by volume, 2015-25
      • Figure 18: Market size and forecast for sales of new individual protection policies, by volume, 2015-25
    • New group contract business continued to grow in 2020
      • Figure 19: Volume and value of new group income protection sales, 2016-20
    • Market drivers and assumptions
      • Figure 20: Key drivers affecting Mintel’s market forecast, 2015-25 (prepared on 5 April 2021)
    • Learnings from the last recession
      • Figure 21: New individual income protection sales and average premium, 2008-12
    • Forecast methodology
  6. Channels to Market

    • Growth in sales through independent advice channels
      • Figure 22: Distribution of new individual (long-term) income protection contracts, by volume, 2015-20
      • Figure 23: Distribution of new individual (long-term) income protection contracts, by value, 2015-20
    • Bancassurance sales decline in 2020
      • Figure 24: Value of income protection (long-term) bancassurance premiums, 2015-20
  7. Market Drivers

    • Growth in the value of loans for house purchase comes to an end in 2020
    • New government support for FTBs could help boost demand for protection
      • Figure 25: Value of residential loans to owner occupiers, by type of borrower, 2016-20
    • Value of remortgage lending plummets by nearly a fifth in 2020
      • Figure 26: Value of residential loans for remortgages and further advances, 2016-20
    • One in five now lives in privately rented accommodation
      • Figure 27: Trends in housing tenure of adults aged 16 and over, by percentage of households living in each type of tenure, 2008/09-2018/19
    • Rising unemployment will hit growth prospects
      • Figure 28: Annual unemployment rate, 2017-25 (forecast)
    • Growth in self-employment has faltered
      • Figure 29: Number of self-employed workers aged 16 years and older (seasonally adjusted), Q1 2010 to Q4 2020
    • Number of new claims paid rises by a fifth in 2019
      • Figure 30: Number of new claims paid vs average value of new claims paid, 2015-19
  8. Regulatory and Legislative Changes

    • FCA provides guidance on supporting customers in financial difficulty
    • Government urged to extend Universal Credit disregard to renters
    • Insurers commit to the Explaining Underwriting Decisions agreement
  9. Companies and Brands – Key Takeaways

    • Aviva retains position as market leader in 2019
    • Smaller players are gaining market share
    • Providers start to roll back COVID-19 changes
    • Providers work to improve access to IP
    • New products launched to appeal to a wider target market
  10. Market Share

    • Aviva holds on to its position as the market leader
    • Legal & General experiences solid growth
    • Smaller players also perform well…
    • …with those outside the top five increasing market share to 31% in 2019
      • Figure 31: Market share of the leading providers of individual income protection policies, based on volume sales, 2019
  11. Competitive Strategies and Launch Activity

    • Providers start to move beyond COVID-19
    • Holloway Friendly removes COVID-19 exclusions
    • LV= reinstates shorter waiting periods
    • Aviva introduces COVID-19 rehab support
    • British Friendly incorporates a benefit reduction option
    • Providers work to improve access to IP via simpler underwriting…
    • Underwriting for MetLife’s new policy determined by five health questions
    • LV= adjusts non-medical limits and eliminates additional evidence requirements
    • Legal and General increases automatic underwriting limits
    • British Friendly removes non-medical limits
    • …and enhancements to adviser support services
    • Zurich implements pre-application underwriting indicator tool
    • The Exeter launches new tools that facilitate the income protection advice process
    • Providers seek to broaden the appeal of IP
    • Holloway Friendly targets people in lower-risk occupations
    • L&G seeks to address initial affordability and the needs of small business owners
    • Legal and General reaches out to renters via Tenant Shop partnership
    • Anorak partners with Canopy to improve IP access to renters
    • Friendly societies expand their range of free IP benefits
    • The Exeter adds to range of services available on its Healthwise app
    • Shepherds Friendly expands rehab support benefits
    • Cirencester Friendly introduces free 24-hour remote GP service
    • LV= acquisition by Bain Capital under inquiry
  12. The Consumer – Key Takeaways

    • Some may have developed a false sense of financial security during the pandemic
    • Lack of access to generous sick pay benefits makes IP relevant for many
    • Consumers need to be urged to ‘stress test’ their financial resilience
    • Unawareness preventing the market from expanding its reach
    • A fresh approach is required to reach the under-protected
  13. Impact of COVID-19 on Consumer Behaviour

    • Consumers’ sense of financial wellbeing has grown during the pandemic…
    • …but some may have a false sense of security
      • Figure 32: The Financial Wellbeing Index, December 2019-March 2021
    • Consumer confidence back near pre-COVID-19 levels in early 2021…
      • Figure 33: The Financial Confidence Index, December 2019-March 2021
    • …but many will remain cautious about spending
      • Figure 34: Changes in household finances, December 2019-March 2021
  14. Protection Product Ownership

    • One in 10 has income protection
      • Figure 35: Protection product ownership, December 2020
    • Little change in penetration levels
      • Figure 36: Income protection product ownership, November 2014-December 2020
    • Ownership remains skewed to the affluent and those with dependants
    • Plenty of untapped potential among under-protected renters
      • Figure 37: Any protection product ownership versus any income protection ownership, by housing tenure, December 2020
    • Women offer an underdeveloped market
      • Figure 38: Protection product ownership, by gender, December 2020
  15. Resilience of Household Finances

    • 13% of households risk running out of money within a month
      • Figure 39: Resilience of household finances, December 2020
    • Renters need income protection
      • Figure 40: Household financial resilience, by housing tenure, December 2020
    • Households in Scotland and Northern England lack resilience
      • Figure 41: Household financial resilience, by region, December 2020
  16. Interest in Income Protection Products

    • Interest in income protection has not improved during the pandemic
      • Figure 42: Interest in income protection products, February/December 2020
    • Under-35s nearly twice as likely as average to be interested
    • A lack of awareness may be holding women back
      • Figure 43: Interest in income protection products, by age and gender, December 2020
  17. Entitlement to Sick Pay

    • Over two in five working adults on statutory sick pay
      • Figure 44: Entitlement to sick pay, December 2020
    • Under-35s are least likely to be eligible for longer-term sick pay benefits
      • Figure 45: Entitlement to sick pay, by age and gender, December 2020
  18. Barriers to Purchase

    • Cost is the main objection
      • Figure 46: Barriers to purchase for income protection, December 2020
    • Awareness is a major barrier
      • Figure 47: Barriers to purchase among those who are interested in taking out income protection insurance compared to all others, December 2020
    • Many who need IP most are unaware it exists
      • Figure 48: Proportion of working UK adults who have not heard of income protection, by gender, age, and housing situation, December 2020
  19. Triggers for Buying Income Protection

    • Recommendations are key to persuading consumers
      • Figure 49: Triggers for buying income protection insurance, December 2020
  20. Appealing Features of a Policy

    • Hospitalisation benefit is the most sought-after extra policy feature
    • Features that help to preserve cover or lower premiums are also attractive
      • Figure 50: Appealing features of an income protection policy, December 2020
    • Older users seek additional benefits…
      • Figure 51: Appeal of selected features of an income protection policy, by age, December 2020
    • …while younger ones seek support and advice
      • Figure 52: Appeal of selected features of an income protection policy, by age, December 2020
  21. Appendix – Data Sources, Abbreviations and Supporting Information

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

    • Forecast methodology

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