UK Term Assurance Market Report 2025
The COVID-19 pandemic and resulting economic slowdown gave the UK protection market an unexpected boost.
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EXECUTIVE SUMMARY
- Opportunities for the term assurance market
- Alleviate customer concerns over AI
- Packaging life cover with a media subscription service will increase appeal
- Promote shorter, flexible terms to attract latecomers
- Market dynamics and outlook
- Market size & forecast
- Market predictions
- Steady growth in annual new sales expected over the next five years
- Aviva moves ahead of Legal & General to claim top spot
- Graph 1: share of new term assurance business (% of volume sales), 2024
- Demand for life insurance is heavily linked to housing and mortgage activity
- What consumers want and why
- Families with children are twice as likely to have life cover than those without children
- Most people take out life insurance to cover living costs should the worst happen
- Lack of affordability is the top reason for having no life cover
- Graph 2: top six reasons for not having life insurance, 2025
- Significant latent demand exists among uninsured parents
- Families with children face greater financial pressures, putting them at greater risk of cancellation
- Around half of all customers are comfortable with digital-only and AI-enabled services
- Graph 3: select attitudes towards life insurance, digital technology and AI, by those with children and those without, 2025
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MARKET DYNAMICS
- Market size
- Over 10 million policies in force
- Annual sales of term insurance have fallen since the pandemic
- Graph 4: volume of new term insurance sales, 2019-24
- Premium income has also declined
- Graph 5: value of new term life insurance premiums, 2019-24
- The market is on course to stabilise in 2025
- Market forecast
- Volume of new sales will increase gradually over the forecast period
- Total new premiums will rise very slowly
- Prospects for new business start to improve
- Market segmentation
- Non-mortgage linked term sales continue to languish
- Graph 6: volume of new term life insurance sales, by type, 2019-25
- Inflation pushes up the cost of cover
- Graph 7: average new term life insurance premium, by type, 2019-25
- Mortgage term policyholders pay higher premiums, on average, than other term policyholders
- Mortgage term customers are less likely to take out a CI rider than in the past
- Graph 8: critical illness rider cross-sell rate, by type of term policy, 2015-24
- Channels to market
- Most term life insurance applicants take advice
- Graph 9: share of new other term life sales, by channel, 2024
- Graph 10: share of new mortgage term life sales, by channel, 2024
- Intermediaries generate the lion’s share of sales
- Scope to expand direct business
- Claims experience
- The pandemic caused a big jump in claims costs
- Graph 11: value of term life insurance claims paid and value of new sales, 2019-24
- 4% of new claims are rejected, mainly due to non-disclosure
- Market share
- Aviva’s acquisition of AIG boosts sales volumes by 50%
- Top five control nearly three quarters of the market
- Significant others
- Market drivers
- Uplift in mortgage transactions helps to revive the mortgage term sector
- Graph 12: number of mortgage versus property transactions, 2019-25
- Hopes of further interest rate cuts fade due to persistently high inflation
- Rebound in first-time buyer market fails to revive term life sales
- Rising house prices push up average sums insured
- Graph 13: term assurance average sum insured, by type of policy, 2020-24
- Renters represent a future growth area
- Regulatory environment
- FCA’s pure protection review highlights the importance of ensuring fair value
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WHAT CONSUMERS WANT AND WHY
- Life insurance ownership
- Most UK adults lack life cover
- Graph 14: ownership of life insurance and other protection products, 2025
- Take-up of life insurance is greatest among parents and homeowners
- The private rental market remains ripe for expansion
- Cross-sell opportunities abound
- Graph 15: segmentation of adult population by life protection coverage, 2025
- Still more to be done to educate and inform consumers
- Lives covered and beneficiary direction
- It’s not uncommon for cohabiting couples to own single life cover
- Graph 16: single and joint life term assurance coverage, by relationship status, 2025
- Regularly remind customers of the importance of naming beneficiaries
- Graph 17: beneficial direction made by policyholders, 2025
- Almost one in three policyholders have written their policy in trust
- Motivation for having life insurance
- Clearing a mortgage is often not the primary purpose of cover
- Graph 18: intended use(s) for term life insurance payout, 2025
- Motivations vary depending on whether or not customers have children
- Graph 19: intended use(s) of any term life insurance payout, by those with and without children, 2025
- Parents are keener to cover general living expenses than a mortgage
- Policyholder attitudes and understanding
- Regular communication with customers can improve understanding
- Graph 20: whether or not policyholders are confident of understanding the terms of their life insurance policy, 2025
- Nearly half of all term policyholders have considered cancelling cover
- Graph 21: whether or not considered cancelling life insurance policy due to the higher cost of living, 2025
- The vast majority of customers think life insurance is essential
- Graph 22: agreement with statements about life insurance, 2025
- A fifth of policyholders lack trust in their insurer to settle claims fairly
- Increased engagement and understanding leads to a greater level of trust
- Younger customers are more likely to embrace digital-only and AI-enabled services
- Interest in getting cover and barriers to purchase
- Nearly a third of uninsured adults are open to getting life cover in the future
- Graph 23: likelihood of buying life insurance in the future, % of uninsured adults, 2025
- Good expansion potential
- Lack of perceived affordability, relevance and awareness are the main barriers
- Graph 24: reasons for not having life insurance, 2025
- Parents face different barriers to those without children
- Graph 25: reason for not having life insurance, by those with children and those without, 2025
- Education is key to boosting take-up
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INNOVATION AND MARKETING TRENDS
- Competitive environment
- Competition declines as supply shrinks
- Bluezone rebrands as Blueberry Life and expands offering
- AIG Life rebrands to Aviva Protection UK and establishes a new partnership with Tesco
- Launch activity and digital developments
- AI is the new driving force behind the digital revolution transforming the insurance industry
- Aviva’s new collaboration with NatWest embeds life quotes in the digital mortgage application process
- Royal London enhances digital services to improve customer access to protection policies
- Clark’s Polly brand offers UK’s first fully digital underwriting solution
- Advertising and marketing activity
- Vitality was the leading advertiser of life insurance in 2024
- Graph 26: advertising expenditure on life insurance products, 2021-24
- Social media forms a major part of Clark UK’s marketing strategy
- Vitality claims its life insurance can help people live longer
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APPENDIX
- Supplementary data
- Market segmentation – mortgage term
- Market segmentation – other term
- Market segmentation – critical illness riders
- Claims data
- Advertising expenditure by media type
- Advertising expenditure by top ten advertisers
- Market forecast data and methodology
- Market forecast: volume of new business
- Market forecast and prediction intervals (volume)
- Market forecast: value of new business
- Market forecast and prediction intervals (value)
- Forecast methodology
- Report scope and definitions
- Product definitions
- Other related products
- Sources used in the report
- Abbreviations and terms
- Consumer research methodology
- Nielsen Ad Intel coverage
The COVID-19 pandemic and resulting economic slowdown gave the UK protection market an unexpected boost. Annual sales of term insurance peaked at 1.71 million in 2021, up from 1.64 million in 2019. However, the industry has been unable to build on this growth, and sales have fallen in each of the past three years. While factors such as the higher cost of living and a downturn in the mortgage market have hit demand, shrinking supply has also played a part.
Conditions will remain challenging in the short term. Despite recent cuts in the bank base rate, elevated house prices and above-target inflation continue to stretch mortgage affordability and household finances, respectively. Consequently, we anticipate sales volumes stabilising in 2025 before a gradual recovery in new business from 2026 onwards.
Over the longer term, prospects for the market are reasonably positive, with opportunities to expand take-up through the delivery of simplified and flexible solutions, which will appeal to a broad base. There remains good scope to widen the product’s appeal beyond mortgage holders, and significantly grow take-up among parents who rent their homes.
This report looks at the following areas:
- Five-year forecast of the individual term assurance market, by volume sales and value of premiums.
- Key provider market share, competitive strategies and innovation.
- Ownership of life insurance and protection products, by demographic.
- Policyholder motivation, beneficial direction, and product engagement and commitment.
- Barriers to purchase and likelihood of non-policyholders getting cover in the future.
There is scope to boost take-up among uninsured parents, especially those who rent, using social media and digital marketing to inform them of the benefits.
Sarah Hitchcock, Associate Consultant – Financial Services
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