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UK Term Assurance market report

Everything you need to make the right decisions

Providing the most comprehensive and up-to-date information and analysis of the Term Assurance 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 term assurance.

  • Term assurance – is a common type of life insurance policy, providing cover for a limited period and hence will only pay out if the policyholder dies within that term or, in the case of some policies, is diagnosed with a terminal illness.
  • The market comprises two distinct product segments:

    • mortgage term – where the sum insured is directly linked to an outstanding mortgage balance; most policies are arranged on a decreasing term basis (see below)

    • other term – where the sum insured is not linked to a mortgage but is determined by the policyholder based on their outgoings.

    Products are more usually classified according to whether they provide level or decreasing cover:

    • level term – where the sum insured remains the same over the duration of the policy term
    • decreasing term – where the sum insured decreases over the term, thereby reducing the cash payout the longer the term runs; policies tend to be cheaper than for level term.

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

    Expert analysis from a specialist in the field

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

    Life insurers are working hard to engage consumers and broaden the appeal of their products. Despite their best efforts, large swathes of people still have no life cover, and yet Mintel’s research shows there is considerable latent demand among the non-insured. Substantially increasing product take-up – by effectively nudging more individuals to buy cover – must therefore remain a key industry objective. 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
            • 12 million policies in force
              • Volume sales up 11% in 2017
                • Figure 1: Forecast of new individual term assurance volume sales – Fan chart, 2013-23
              • 68% of new contracts in 2017 were non-mortgage-related
                • Figure 2: Product portfolio mix – Share of total new individual term assurance contracts, by policy type, 2013-17
              • Other term policies are less likely to be sold with a critical illness rider
                • Advisers are heavily relied upon to generate sales
                  • Market fortunes are intrinsically linked to those of the housing market
                    • Companies and brands
                      • A concentrated market
                        • Figure 3: Top five providers’ share of total volume sales of individual term assurance, 2017
                      • New innovation
                        • The consumer
                          • 31% of UK adults have life insurance
                            • Figure 4: Ownership of life insurance and other protection products, April 2018
                          • Just over half arranged their policy within the past five years
                            • Figure 5: Length of time ago took out policy, April 2018
                          • Those who arranged their policy more than five years ago are more likely to have used an adviser
                            • 46% of the non-insured have someone who depends on them financially
                              • Figure 6: Level of concern about how dependents would manage financially without them, April 2018
                            • 38% of the non-insured would consider taking out a policy in the future
                              • Figure 7: Future consideration of life insurance, April 2018
                            • 45% of future prospects don’t have cover because they can’t afford it
                              • Figure 8: Reasons for not having life insurance at the current time (future prospects only), April 2018
                            • What people most want is simple, low-cost cover
                              • Figure 9: Product benefits and qualities that would encourage future purchase, April 2018
                            • What we think
                            • Issues and Insights

                              • Encourage and inspire rather than admonish and guilt-trip people into action
                                • The facts
                                  • The implications
                                    • Delaying benefits no one
                                      • The facts
                                        • The implications
                                        • The Market – What You Need to Know

                                          • A mature and stable market
                                            • New term sales grew by 11% in 2017
                                              • Product mix favours non-mortgage-related level-term policies
                                                • Advisers play a huge role in this market
                                                  • Market fortunes are intrinsically linked to those of the housing market
                                                  • Market Size and Forecast

                                                    • Nearly 12 million policies in force
                                                      • Sales start to recover…
                                                        • Figure 10: New individual term assurance sales and average annual premium, 2013-17
                                                      • …but there’s still some way to go
                                                        • Short-term outlook: reduced mortgage activity could hamper sales growth
                                                          • Figure 11: Forecast of new individual term assurance volume sales – Fan chart, 2013-23
                                                          • Figure 12: Forecast of new individual term assurance premiums – Fan chart, 2013-23
                                                        • Forecast methodology
                                                        • Market Segmentation

                                                          • Recent growth driven by non-mortgage-related business
                                                            • Figure 13: Volume of new individual regular-premium term assurance policy sales, by policy type, 2013-17
                                                          • Mortgage term has a higher average premium than other term
                                                            • Figure 14: Average new premium – Mortgage term versus other term, 2013-17
                                                          • 91% of mortgage term policies are sold on a decreasing basis
                                                            • Figure 15: Summary of new term assurance business, by type of policy, 2017
                                                          • Mortgage term policies are more likely to include a critical illness rider
                                                          • Channels to Market

                                                            • Independent advisers have grown their share of mortgage term business
                                                              • Figure 16: Distribution of new mortgage term assurance business, by channel, 2014-17
                                                            • Non-advised channel has a greater presence in the other term sector
                                                              • Figure 17: Distribution of new other term assurance business, by channel, 2014-17
                                                          • Market Drivers

                                                            • Mortgage lending grew strongly in 2016 and 2017, driven by first-time buyers…
                                                              • Figure 18: Volume of house purchase loans, by type of borrower, 2008-17
                                                            • …which boosted demand for term assurance and other protection products
                                                              • Making cover relevant to Generation Rent
                                                                • Low mortality rate among the target age groups means there is a low incidence of claims
                                                                  • Figure 19: Number of deaths in England and Wales and mortality rate, by age and gender, 2016
                                                                • Life insurers having to adapt to an ageing population
                                                                  • Average sum insured reached £146,000 in 2017
                                                                    • Figure 20: Average sum insured for new term assurance policies (including those with critical illness riders) and average first-time buyer advance, 2003-17
                                                                • Companies and Brands – What You Need to Know

                                                                  • Top five had a combined share of 79% in 2017
                                                                    • The industry has been working on speeding up application times and developing simplified variants of cover
                                                                      • Health incentives offer a more positive message
                                                                        • Limited amount invested in above-the-line advertising
                                                                        • Market Share

                                                                          • Recent mergers and acquisitions
                                                                            • A heavily concentrated market
                                                                              • Figure 21: Top five providers of individual term assurance, by sales volumes, 2015-17
                                                                            • Smaller players
                                                                              • Market will see a new protection challenger in 2018: Guardian
                                                                              • Competitive Strategies

                                                                                • Recent trends in product development
                                                                                  • Legal & General and Zurich take advantage of our love of selfies
                                                                                    • Canada Life Individual Protection launches new app
                                                                                      • VitalityLife launches Wellness Optimiser and ‘Vitality Lite’ option
                                                                                        • It’s all about simplicity: AIG Life
                                                                                        • Advertising and Marketing Activity

                                                                                          • Three times as much is spent on advertising over-50s plans as on term life assurance
                                                                                            • Figure 22: Total above-the-line, online display and direct mail advertising expenditure on protection products, 2014-18
                                                                                          • Social media
                                                                                            • Beagle Street was the top advertiser in the year to March 2018
                                                                                                • Figure 23: Top 10 advertisers of above-the-line, online display and direct mail advertising expenditure on life insurance, 2017 and 2018
                                                                                              • Nielsen Ad Intel coverage
                                                                                              • The Consumer – What You Need to Know

                                                                                                • Around one in three UK adults have life insurance
                                                                                                  • 56% of term life policyholders arranged cover within the past five years
                                                                                                    • Research suggests a shift from adviser-led to direct sales
                                                                                                      • 46% of the non-insured have someone who depends on them financially
                                                                                                        • 38% of the non-insured would consider taking out a policy in the future
                                                                                                        • Product Ownership

                                                                                                          • Around two in three UK adults do not have life insurance
                                                                                                            • Figure 24: Ownership of life insurance and other protection products, April 2018
                                                                                                          • Mortgage holders who have children are a key target group
                                                                                                            • Figure 25: Ownership of life insurance and other protection products, by parents and mortgage holders, April 2018
                                                                                                          • Self-employed are under-represented in the market
                                                                                                            • One in six don’t know what type of life policy they have
                                                                                                              • Figure 26: Type of life insurance policy held, April 2018
                                                                                                            • 39% of term assurance policyholders have joint-life cover
                                                                                                              • Figure 27: Lives covered, by type of life insurance, April 2018
                                                                                                          • Age of Policy and Sales Channel Used

                                                                                                            • Three quarters of term life policyholders have held their policy for 10 years or less
                                                                                                              • Figure 28: Length of time ago took out policy, by type of policy, April 2018
                                                                                                            • 48% of term life policyholders arranged cover directly with their provider…
                                                                                                              • Figure 29: Channel used to arranged policy, by type of policy, April 2018
                                                                                                            • …while 18% used a price comparison site
                                                                                                              • Price comparison sites have grown their distribution share over the past five years
                                                                                                                • Figure 30: Channel used to arranged policy, by length of time ago arranged policy – term life policyholders only, April 2018
                                                                                                            • The Non-insured and their Dependents

                                                                                                              • 46% of the non-insured have people who depend on them financially
                                                                                                                • Figure 31: Identifying those among the non-insured with dependents, April 2018
                                                                                                              • Most of the non-insured have minimal or no savings
                                                                                                                • Figure 32: Household income and savings profile of non-insured with dependents, April 2018
                                                                                                              • 62% worry about how their dependents would cope financially if something were to happen to them
                                                                                                                • Figure 33: Level of concern about how dependents would manage financially without them, April 2018
                                                                                                            • Targeting the Non-insured

                                                                                                              • 38% of the non-insured would consider taking out a life policy in the future
                                                                                                                • Figure 34: Future consideration of life insurance, April 2018
                                                                                                              • 31% of over-45s say they don’t have cover because they keep putting it off
                                                                                                                • Figure 35: Reasons for not having life insurance (future prospects only), April 2018
                                                                                                              • Keep propositions simple and affordable
                                                                                                                • Figure 36: Product benefits and qualities most likely to encourage future purchase, April 2018
                                                                                                              • Health and fitness benefit appeal most to the under-45s
                                                                                                                • 58% would prefer to arrange cover directly with an insurer
                                                                                                                  • Figure 37: Sales channels most likely to be used by future prospects, April 2018
                                                                                                              • 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 volume forecast – Best- and worst-case scenarios
                                                                                                                            • Figure 38: Forecast of new individual term assurance sales – Best- and worst-case scenarios, 2018-23
                                                                                                                          • Total market value forecast – Best- and worst-case scenarios
                                                                                                                            • Figure 39: Forecast of new individual term assurance premiums – Best- and worst-case scenarios, at current prices, 2018-23
                                                                                                                          • Market sector forecast: mortgage term
                                                                                                                            • Figure 40: Forecast of new individual mortgage term assurance volume sales – Fan chart, 2013-23
                                                                                                                            • Figure 41: Forecast of new individual mortgage term assurance premiums – Fan chart, 2013-23
                                                                                                                          • Market sector forecast: other term
                                                                                                                            • Figure 42: Forecast of new individual other term assurance volume sales – Fan chart, 2013-23
                                                                                                                            • Figure 43: Forecast of new individual other term assurance premiums – Fan chart, 2013-23
                                                                                                                          • Forecast methodology