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Term Assurance - UK - June 2019

What you need to know

The term assurance market has experienced a period of inconsistent growth in recent years; however, 2018 marked the third successive year of growth in terms of sales of new contracts. This growth can largely be attributed to the non-mortgage related market with non-advised direct to consumer policies increasing in popularity. Policies linked to a mortgage have experienced little growth, with people shunning the traditional route of arranging a policy with their mortgage adviser. Consumers are favouring faster life insurance applications, although this may come at a cost for those with ongoing conditions, or who are looking for a more personalised experience.

“Faster and simpler applications have made term assurance more appealing. However, the growth of direct to consumer products means that there needs to be a shift in the way that providers target new customers. Those with specific insurance needs or ongoing conditions need to be made aware that they have options, while the introduction of products to different segments, such as parents or renters, with specific benefits attached can help to improve its relevance.”

– Douglas Kitchen, Financial Services Analyst

This report examines the following issues:

  • Providers have an opportunity to re-engage with the mortgage market
  • Greater segmentation can give life insurance a more relevant feel

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this report
        • Intermediary market definitions
        • Executive Summary

            • The market
              • Period of inconsistent growth continues …
                • Figure 1: New individual term assurance sales and average annual premiums, 2014-18
              • … driven by the non-mortgage related market
                • Figure 2: Volume of new individual regular-premium term assurance policy sales, by policy type, 2014-18
              • Average term assurance payout reaches record high
                • Figure 3: Total value and average claims paid for term assurance, 2015-18
              • Companies and brands
                • AIG Life term assurance sales increase by over 60%
                  • New gender-specific brands hope to make an impact
                    • The consumer
                      • Scope for greater penetration in the life insurance market
                        • Figure 4: Ownership of life insurance and other protection products, March 2019
                      • Only one in five are likely to take out life insurance
                        • Figure 5: Likelihood to take out a life insurance policy, March 2019
                      • Consumers favour direct channels when arranging life cover
                        • Figure 6: Ranking of preferred channels when taking out a new life insurance policy, March 2019
                      • Fast and simple life insurance applications appeal but consumers also want more guidance
                        • Figure 7: Attitudes towards life insurance applications, March 2019
                      • Open banking benefits can encourage life insurance customers to share their financial data
                        • Figure 8: Incentives to share personal and financial data with life insurance providers, March 2019
                      • Over-reliance upon savings as an alternative to life insurance
                        • Figure 9: Alternatives to life insurance, March 2019
                      • Providers are missing an opportunity during the mortgage application process
                        • Figure 10: Non-ownership of life insurance among mortgage owners, March 2019
                      • What we think
                      • Issues and Insights

                        • Providers have an opportunity to re-engage with the mortgage market
                          • The facts
                            • The implications
                              • Greater segmentation can give life insurance a more relevant feel
                                • The facts
                                  • The implications
                                  • The Market – What You Need to Know

                                    • Period of inconsistent growth continues …
                                      • … driven by the non-mortgage related market
                                        • The non-advised market goes from strength to strength
                                          • Average term assurance payout reaches record high
                                          • Market Size and Forecast

                                            • Growth continues to fluctuate in the term assurance market
                                              • Figure 11: New individual term assurance sales and average annual premiums, 2014-18
                                            • 2017 sees the number of in-force polices rise to pre-2014 levels
                                              • Growth in the direct-to-consumer market will drive future sales
                                                • Figure 12: Forecast of new individual term assurance volume sales, 2014-24
                                                • Figure 13: Forecast of new individual term assurance premiums, 2014-24
                                              • Forecast methodology
                                              • Market Segmentation

                                                • Mortgage-linked policies lose their market share
                                                  • Technology could drive more mortgage-linked sales in future
                                                    • Figure 14: Volume of new individual regular-premium term assurance policy sales, by policy type, 2014-18
                                                  • Premium gap continues to widen
                                                    • Figure 15: Average new annual premium – Mortgage term versus other term, 2014-18
                                                  • Scope for greater cross-selling of critical illness cover
                                                    • Figure 16: Critical illness rider cross-sell rate – Mortgage term versus other term, 2013-18
                                                • Channels to Market

                                                  • Mortgage term market remains reliant upon independent advice
                                                    • Figure 17: Distribution of new mortgage term assurance business, by channel, 2015-18
                                                  • Non-advised market continues to grow
                                                    • Figure 18: Distribution of new other term assurance business, by channel, 2015-18
                                                  • Bancassurance market remains flat
                                                    • Figure 19: Number of new term assurance contracts sold via bancassurance, 2014-18
                                                • Market Drivers

                                                  • Average term assurance payout reaches record high
                                                    • Figure 20: Total value and average claims paid for term assurance, 2015-18
                                                  • Average sum assured falls in 2018
                                                    • Figure 21: Average sum assured for new term assurance sales, 2014-18
                                                  • Growth stalls in the housing market
                                                    • Figure 22: Volume of house purchase loans, by type of borrower, 2012-18
                                                  • FCA focuses on the ‘uninsurable’
                                                    • Smokers and regular drinkers are on the decline
                                                      • Figure 23: Proportion of cigarette smokers and regular drinkers of alcohol, 2005-17
                                                    • Insurers turn to wearable tech to mitigate risk and encourage healthy living
                                                    • Companies and Brands – What You Need to Know

                                                      • AIG Life term assurance sales increase by over 60%
                                                        • Brands are increasingly targeting specific segments of the market
                                                          • New partnerships and open banking can improve access to cover
                                                            • Beagle Street tops life insurance adspend
                                                            • Market Share

                                                              • Legal & General continues to dominate market …
                                                                • … while AIG Life sees new sales increase dramatically
                                                                  • Figure 24: Top five providers of individual term assurance, by sales volume, 2016-18
                                                              • Competitive Strategies

                                                                • New technology and partnerships support growth of the direct to consumer market
                                                                  • Through Open Banking …
                                                                    • … and new channels to market
                                                                      • New products and services look to target specific segments of the market
                                                                        • Scottish Widows is looking to more simplified terminology to improve engagement
                                                                          • Through new partnerships AIG is looking to extend its reach
                                                                            • To the mortgage market …
                                                                              • … and to those looking to improve their health and wellbeing
                                                                                • Aviva improves its bereavement support offering
                                                                                • Advertising and Marketing Activity

                                                                                  • Over-50s plans continue to dominate life insurance advertising spend
                                                                                    • Figure 25: Total above-the-line, online display and direct mail advertising expenditure on life insurance and over 50’s guaranteed acceptance plans, 2016/17-2018/19
                                                                                  • Beagle Street tops total spend for the second year running
                                                                                    • Vitality boosts adspend as it promotes exercise-linked benefits
                                                                                      • New gender-specific brands enter the top 10
                                                                                        • Figure 26: Top ten advertisers of above-the-line, online display and direct mail advertising expenditure on life insurance, 2017/18-2018/19
                                                                                      • Nielsen Ad Intel coverage
                                                                                      • The Consumer – What You Need to Know

                                                                                        • Scope for greater penetration in the life insurance market
                                                                                          • Only one in five are likely to take out life insurance
                                                                                            • Consumers favour direct channels when arranging life cover
                                                                                              • Fast and simple life insurance applications appeal but consumers also want more guidance
                                                                                                • People can be persuaded to share data for personalised recommendations
                                                                                                  • Over-reliance upon savings as an alternative to life insurance
                                                                                                    • Providers are missing an opportunity during the mortgage application process
                                                                                                    • Protection Product Ownership

                                                                                                      • Over 60% do not have any form of life cover
                                                                                                        • Figure 27: Ownership of life insurance and other protection products, March 2019
                                                                                                      • Over half of mortgage owners have life insurance
                                                                                                        • Opportunity for greater targeting of renters
                                                                                                          • Figure 28: Ownership of life insurance and other protection products, by housing situation, March 2019
                                                                                                        • 13% are unsure about the type of cover they hold
                                                                                                          • Figure 29: Type of life insurance policy held, March 2019
                                                                                                      • Likelihood to Consider Life Insurance

                                                                                                        • Just 21% are likely to take out life insurance
                                                                                                          • Opportunities exist to take a new approach to cover
                                                                                                            • Figure 30: Likelihood to take out a life insurance policy, March 2019
                                                                                                          • Younger generations show most interest in taking out cover in the future
                                                                                                            • Figure 31: Likelihood to take out a life insurance policy, by generation, March 2019
                                                                                                        • Consumer Preferences for Arranging Life Insurance

                                                                                                          • Consumers prefer to arrange their policy directly
                                                                                                            • Interest in banks is not reflected in the market
                                                                                                              • Figure 32: Ranking of preferred channels when taking out a new life insurance policy, March 2019
                                                                                                            • Scope for greater product segmentation in the market
                                                                                                              • Figure 33: Important factors when taking out a life insurance policy, March 2019
                                                                                                            • Ongoing conditions a greater factor for those without protection
                                                                                                                • Figure 34: Important factors when taking out a life insurance policy, by protection product ownership, March 2019
                                                                                                            • Attitudes towards Life Insurance Applications

                                                                                                              • Consumers want a fast and simple application process …
                                                                                                                • Figure 35: Attitudes towards life insurance applications, March 2019
                                                                                                              • … but a compromise is required as people also want access to more personal advice
                                                                                                                • Figure 36: Response to the statement ‘When applying for a life insurance policy I would like to be able to access advice about my personal circumstances’, by interest in a basic life insurance application, March 2019
                                                                                                            • Data Sharing Incentives

                                                                                                              • Technology will help to drive personalised recommendations
                                                                                                                • Figure 37: Incentives to share personal and financial data with life insurance providers, March 2019
                                                                                                              • … and can reinvigorate the bancassurance channel
                                                                                                                • Figure 38: Incentives to share personal and financial data with life insurance providers, by top ranking of preferred channels when taking out a life insurance policy, March 2019
                                                                                                            • Alternatives to Life Insurance

                                                                                                              • Most plan to rely on their savings
                                                                                                                • Figure 39: Alternatives to life insurance, March 2019
                                                                                                              • New initiatives can encourage younger consumers to consider alternatives
                                                                                                                • Figure 40: Alternatives to life insurance, by age, March 2019
                                                                                                            • Life Insurance and Mortgage Applications

                                                                                                              • Insurers are missing out on a large proportion of the mortgage market …
                                                                                                                • …while new partnerships and technology can help prevent a missed opportunity
                                                                                                                  • Figure 41: Non-ownership of life insurance among mortgage owners, March 2019
                                                                                                              • Appendix – Data Sources, Abbreviations and Supporting Information

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

                                                                                                                      • Total market volume forecast
                                                                                                                        • Figure 42: Forecast of new individual term assurance sales – best and worst case scenarios, 2019-2024
                                                                                                                      • Total market value forecast
                                                                                                                        • Figure 43: Forecast of new individual term assurance premiums – best and worst case scenarios, at current prices, 2019-24
                                                                                                                      • Market sector forecast: mortgage term assurance
                                                                                                                        • Figure 44: Forecast of new individual mortgage term assurance volume sales, 2014-24
                                                                                                                        • Figure 45: Forecast of new individual mortgage term assurance premiums, 2014-24
                                                                                                                      • Market sector forecast: other term assurance
                                                                                                                        • Figure 46: Forecast of new individual other term assurance volume sales, 2014-24
                                                                                                                        • Figure 47: Forecast of new individual other term assurance premiums, 2014-24
                                                                                                                      • Forecast methodology

                                                                                                                      Term Assurance - UK - June 2019

                                                                                                                      £1,995.00 (Excl.Tax)