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UK Critical Illness Cover market report

Everything you need to make the right decisions

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

Mintel has the answers you’re looking for

What are the key challenges facing the industry and how fast are its rates of growth? Who is the consumer and what do they want? Where are the opportunities, where are the risks and what lies ahead?

Products covered in this Report

This Report examines the UK market for individual critical illness insurance.

Critical illness cover is a long-term policy designed to pay a tax-free lump sum to the policyholder on the diagnosis of certain illnesses and medical conditions of a specific severity, such as cancer, heart attack, stroke, multiple sclerosis, etc. The number and range of medical conditions covered can vary considerably between insurers. It can be bought on its own (ie as a standalone policy) or as an addition (ie as a ‘rider’ benefit) to other types of insurance, notably term life assurance. It can be taken out on a single or joint basis. Some policies include cover for children, either as standard or as an optional extra.

Although the focus of this Report is on critical illness insurance, reference is also made to other related products, such as term assurance. For definitions of these, see the Appendix.

Expert analysis from a specialist in the field

Written by Sarah Hitchcock, a leading analyst in the Finance sector, her extensive knowledge delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

Despite the constant tweaking of policy terms, devising more simplified and affordable propositions and introducing added-value benefits, providers still struggle to effectively tap into the strong latent demand that exists within the core target groups of families and mortgage holders. As such, it remains an underpenetrated market. Sarah Hitchcock
Senior Financial Services Analyst

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this Report
      • Executive Summary

          • The market
            • 4.5 million in-force policies
              • New business picks up…
                • Figure 1: Forecast of new individual critical illness premiums, at current prices – fan chart, 2012-22
              • …underpinned by a buoyant mortgage market
                • Policy riders account the majority of new sales
                  • Growth of non-advised sales
                    • ABI proposes changes to Guide on Minimum Standards
                      • Companies and brands
                        • Legal & General retains market-leader position
                          • Figure 2: Estimated market shares of the top five providers of new individual critical illness cover, 2015 and 2016
                        • Smaller players gain ground
                          • Recent trends in product development
                            • Sparse amount invested in above-the-line advertising
                              • The consumer
                                • Ownership of protection insurance
                                  • Figure 3: Ownership of protection insurance products, October 2017
                                • 75% of policyholders have held their policy for 10 years or less
                                  • Figure 4: Length of time ago took out critical illness cover, October 2017
                                • Low awareness of child benefit
                                  • Recent customers are more likely to have approached providers directly
                                    • Figure 5: Channel used to arrange policy, by when took out policy, October 2017
                                  • Scope to improve customer communication and understanding
                                    • Figure 6: Agreement with statements about provider communication and policyholder engagement, October 2017
                                  • Cost is a key barrier, but it’s not an issue for everyone
                                    • Figure 7: Reasons for not having critical illness cover, October 2017
                                  • Most of the non-insured lack an adequate safety-net alternative…
                                    • …and many could face real hardship if the worst happened
                                      • Figure 8: Ability to cope financially if unable to work for a year or more due to illness, October 2017
                                    • Significant latent demand
                                      • Figure 9: Likelihood of considering product in the future, by parents and mortgage holders, October 2017
                                    • What we think
                                    • Issues and Insights

                                      • Give prospective customers time to think, and a better idea of cost upfront
                                        • The facts
                                          • The implications
                                            • Is there still potential for hybrid products?
                                              • The facts
                                                • The implications
                                                  • Scope to upsell by incentivising policyholders to regularly review cover
                                                    • The facts
                                                      • The implications
                                                      • The Market – What You Need to Know

                                                        • 4.5 million in-force policies
                                                          • New premiums grow by 8% in 2017
                                                            • Growth driven by increase in first-time buyer mortgages
                                                              • Policy riders accounted for 92% of sales in 2017
                                                                • Non-advised channel sees further growth, albeit from a low base
                                                                  • ABI issues new draft Guide on Minimum Standards
                                                                  • Market Size and Forecast

                                                                    • Mintel estimates there are around 4.5 million policies in force
                                                                      • New business levels rise again in 2017
                                                                        • Figure 10: Volume and value of new individual critical illness sales and average annual premium, 2012-17
                                                                      • Recent trends and contributing factors
                                                                        • Average premium stabilises, but for how long?
                                                                          • Steady premium growth over the next five years…
                                                                            • Figure 11: Forecast of new individual critical illness premiums, at current prices – fan chart, 2012-22
                                                                            • Figure 12: Forecast of new individual critical illness premiums, at current and constant prices, 2012-22
                                                                          • …with stable volume sales
                                                                            • Figure 13: Forecast of new individual critical illness policy sales – fan chart, 2012-22
                                                                            • Figure 14: Forecast of new individual critical illness contracts, 2012-22
                                                                          • Forecast methodology
                                                                          • Market Segmentation

                                                                            • Most policies are sold as a rider benefit to term insurance
                                                                              • Figure 15: New individual critical illness sales – rider benefit versus standalone policies, 2012-17
                                                                            • Mortgage term customers more likely to take out a critical illness rider
                                                                                • Figure 16: Critical illness rider benefits as a proportion of new individual term assurance business, 2012-17
                                                                            • Channels to Market

                                                                              • Most sales are intermediated, although direct sales are increasing
                                                                                • Figure 17: Volume sales of new individual term insurance policies with critical illness riders, by channel, 2013-17
                                                                              • Independent advisers grow their share
                                                                                • Figure 18: Proportional distribution of new individual term critical illness riders, by channel, 2013-17
                                                                              • Standalone market sees strong growth in independent advice sales
                                                                                • Figure 19: Volume sales of new individual standalone critical illness contracts, by channel, 2014-17
                                                                            • Market Drivers

                                                                              • Home purchase loans increased in 2016 and 2017, driven by first-time buyers…
                                                                                • Figure 20: Volume of house purchase loans, by type of borrower, 2008-17
                                                                              • …which likely contributed to the growth in critical illness sales
                                                                                • Growth of Generation Rent prompts providers to adapt products
                                                                                  • Rising longevity raises risk of ill health in later years
                                                                                    • Industry responds to ABI’s proposed new minimum standards
                                                                                      • Cancer accounts for around two thirds of claims
                                                                                        • Figure 21: Proportional distribution of claims paid (volume), by critical illness, 2016
                                                                                      • Total cost of critical illness claims reached £976 million
                                                                                        • Figure 22: Number of critical illness claims paid and declined, value of claims and average claim, 2013-16
                                                                                    • Companies and Brands – What You Need to Know

                                                                                      • Legal & General retains market-leader position
                                                                                        • Smaller players gain ground
                                                                                          • Recent trends in product development
                                                                                            • Sparse amount invested in above-the-line advertising
                                                                                            • Market Share

                                                                                              • Mixed results for the top five in 2016
                                                                                                • Royal London puts in a strong performance following subsidiary rebrand
                                                                                                  • Figure 23: Volume sales and market shares of the top five providers of new individual critical illness cover, 2015 and 2016
                                                                                                • Smaller players increase share
                                                                                                • Competitive Strategies

                                                                                                  • Providers regularly tweak products to make them more appealing
                                                                                                    • VitalityLife upgrades Serious Illness Cover with Cancer Relapse benefit…
                                                                                                      • …and launches Wellness Optimiser
                                                                                                        • SunLife and AIG Life take the simple approach
                                                                                                          • Providers enhance existing propositions
                                                                                                          • Advertising and Marketing Activity

                                                                                                            • Minimal above-the-line advertising specifically centred on critical illness
                                                                                                              • Figure 24: Total above-the-line, online display and direct mail advertising expenditure on life protection products, 2013-17
                                                                                                            • Other media
                                                                                                              • Nielsen Ad Intel coverage
                                                                                                              • The Consumer – What You Need to Know

                                                                                                                • Parents with a mortgage are most likely to have cover
                                                                                                                  • 75% of policyholders have held their policy for 10 years or less
                                                                                                                    • Scope to improve customer communication and understanding
                                                                                                                      • Recent customers are more likely to have approached providers directly
                                                                                                                        • Cost is a key barrier, but it’s not an issue for everyone
                                                                                                                          • Most of the non-insured lack an adequate safety-net alternative
                                                                                                                            • Significant latent demand
                                                                                                                            • Ownership of Protection Insurance

                                                                                                                              • One in 10 adults have critical illness cover
                                                                                                                                • Figure 25: Ownership of protection insurance products, October 2017
                                                                                                                              • Income protection has the potential to supersede critical illness
                                                                                                                                • The main targets are mortgage holders and parents
                                                                                                                                  • Figure 26: Ownership of protection insurance products, by parents and mortgage holders, October 2017
                                                                                                                              • Policyholders – Length of Time Held and Lives Covered

                                                                                                                                • More than half arranged their policy in the past five years
                                                                                                                                  • Figure 27: Length of time ago took policy out, October 2017
                                                                                                                                • Scope to improve take-up of joint policies
                                                                                                                                  • Figure 28: Lives covered by policy, by when took out policy, October 2017
                                                                                                                                • Low awareness of child benefit
                                                                                                                                • Policyholders – Channel Used to Arrange Policy

                                                                                                                                  • Customers who took out their policy post-RDR are more likely to have arranged it directly with an insurer
                                                                                                                                    • Figure 29: Channel used to arrange policy, by when took out policy, October 2017
                                                                                                                                • Policyholders – Provider Communication and Policy Changes

                                                                                                                                  • One in six do not understand what their policy covers them for
                                                                                                                                    • Figure 30: Agreement with statements about provider communication and policyholder engagement, October 2017
                                                                                                                                  • Longer-standing customers are less likely to receive annual communications from their provider…
                                                                                                                                    • Figure 31: Agreement with statements about policy changes, communication and engagement, October 2017
                                                                                                                                  • …and much less likely to review their cover
                                                                                                                                  • Non-policyholders – Reasons for Not Having Cover

                                                                                                                                    • 39% say they can’t afford it
                                                                                                                                      • 21% don’t want to pay for insurance they may never need
                                                                                                                                        • Figure 32: Reasons for not having critical illness cover, October 2017
                                                                                                                                      • 15% don’t trust insurers to pay out
                                                                                                                                        • 11% say it’s too difficult working out what is and isn’t covered
                                                                                                                                          • Figure 33: Reasons for not having critical illness cover, by parents and mortgage holders, October 2017
                                                                                                                                      • Non-policyholders – Financial Strength

                                                                                                                                        • 73% of the non-insured either lack alternative provision or haven’t even considered the matter
                                                                                                                                          • Figure 34: Level of thought given to how would manage if developed a critical illness, by parents and mortgage holders, October 2017
                                                                                                                                        • Most of those who say they’ve made alternative provision have a modest amount of savings
                                                                                                                                          • Figure 35: Amount of savings, by non-policyholders, October 2017
                                                                                                                                          • Figure 36: Ownership of protection insurance products, by non-policyholders, October 2017
                                                                                                                                        • Many without cover risk real financial hardship
                                                                                                                                          • Figure 37: Ability to cope financially if unable to work for a year or more due to illness, by parents and mortgage holders, October 2017
                                                                                                                                        • 25-44-year-olds are at greatest risk
                                                                                                                                        • Non-policyholders – Future Product Consideration

                                                                                                                                          • 58% of non-insured parents would consider taking out cover in the future
                                                                                                                                            • Figure 38: Likelihood of considering product in the future, by parents and mortgage holders, October 2017
                                                                                                                                          • In conclusion
                                                                                                                                          • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                            • Product definitions
                                                                                                                                              • Intermediary market definitions
                                                                                                                                                • Abbreviations
                                                                                                                                                  • Data sources
                                                                                                                                                    • Consumer research methodology
                                                                                                                                                    • Appendix – Market Size and Forecast

                                                                                                                                                      • Total market value forecast – best- and worst-case scenarios
                                                                                                                                                        • Figure 39: Forecast of new individual critical illness premiums – best- and worst-case scenarios, at current prices, 2017-22
                                                                                                                                                      • Total market volume forecast – best- and worst-case scenarios
                                                                                                                                                        • Figure 40: Forecast of new individual critical illness policy sales – best- and worst-case scenarios, 2017-22
                                                                                                                                                      • Forecast methodology