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Term Assurance - UK - July 2014

Published By :

Mintel

Published Date : Jul 2014

Category :

Banking

No. of Pages : 150 Pages

Increased mortgage lending in 2013 did not result in a corresponding increase in new term assurance sales. Regulatory demands have made cross-selling term assurance products less of a focus for intermediaries. Developing profitable and efficient direct-to-consumer channels will therefore become an increasingly important priority for providers in order to reduce their reliance on intermediaries.
Table of Content

Introduction

Report scope and market definition
Abbreviations

Executive Summary

The market
Term assurance sales dip in 2013
Slow premium growth predicted for the term assurance market
Figure 1: Forecast of total new individual term assurance premiums, at current prices – fan chart, 2009-19
Market factors
Improving housing market yet to benefit the term assurance market
Regulation has slowed advised sales
Company, brands and innovation
Legal & General leads the market
Figure 2: Top five individual term assurance providers, by sales volumes, 2013
Little innovation in the term assurance market
Adspend increased by 52% in the 12 month to May 2014
Only around a tenth of term assurance sales non-advised in 2013
The consumer
A quarter of consumers own term life insurance
Figure 3: Ownership of life insurance products, May 2014
The majority of life insurance policies are purchased with advice
Figure 4: Sources consulted when purchasing a life insurance policy, May 2014
The majority of consumers are positive about the application process
Figure 5: Ways of arranging term assurance, May 2014
Starting a family is the main trigger for taking out life insurance
Figure 6: Triggers for arranging life insurance, May 2014
Consumers are aware of the importance of owning life insurance, but often fail to purchase
Figure 7: Attitudes towards life insurance, May 2014
What we think

Issues and Insights

Direct-to-consumer channels will become increasingly important for providers
The facts
The implications
Consumers require financial education in order to close the protection gap
The facts
The implications

Trend Application

Term assurance providers should illustrate the dangers of not having life protection
Quick quotes for simple policies
Engaging with consumers early to help them lock-in low premiums

Market Drivers

Key points
The improved economic outlook should benefit the term assurance market
Increasing number of housing transactions has failed to boost the term assurance market
Figure 8: Number of UK residential property transactions with a value of £40,000 upwards – seasonally adjusted, Q1 2007-Q1 2014
More first-time buyers presents opportunities for the term assurance market
Figure 9: Number of loans for house purchase, by type of borrower, 2007-13
Term assurance and whole of life policies dominate the protection market
Figure 10: Number of individual protection policies in force, by type, 2011-12
Term assurance policies are almost guaranteed to pay out claims
Figure 11: Number of claims paid out across the protection industry, 2013
Regulation and legislation
Gender directive distorts sales figures in the life insurance industry
Introduction of MMR will mean that mortgage advisers are short of time
The introduction of the RDR has resulted in a reduction of bancassurance sales
Solvency II Directive continues to be delayed

Who’s Innovating?

Key points
A lack of innovation in the term assurance market
Zurich launches Investment Life Cover for investments held on its platform
Ageas launches relevant life insurance product

Market Size and Forecast

Key points
The value of term assurance premiums decreased by 14% in 2013
Figure 12: New individual term assurance sales and average annual premium, 2009-13
Number of mortgage term assurance sales decreases by 11% in 2013
Figure 13: Volume of new individual regular-premium term assurance policy sales, by policy type, 2009-13
The average cost of protection term assurance continues to decrease
Figure 14: Average new premium – mortgage term assurance vs protection term assurance, 2009-13
Market forecast
Slow premium growth predicted for the term assurance market
Figure 15: Forecast of total new term assurance premiums, at current prices – Fan chart 2009-19
Figure 16: Forecast of new individual term assurance premiums, at current and constant prices, 2009-19
Forecast methodology
Fan chart explanation

Market Share

Key points
Legal & General remains the largest term assurance provider
Figure 17: Top five individual term assurance providers, by sales volumes, 2011-13

Companies and Products

Ageas
Figure 18: Key financial data for Ageas, 2012-13
Aviva
Figure 19: Key financial data for Aviva plc, 2012-13
Friends Life
Figure 20: Key financial data for Friends Life, 2012-13
Legal & General
Figure 21: Key financial data for Legal & General, 2012-13
Scottish Widows

Brand Communication and Promotion

Key points
Adspend increased by 52% in the 12 months to May 2014
Figure 22: Total advertising expenditure on life products, by product category, 2011/12- 2013/14
Smart Insurance continues to top adspend with TV campaign
Figure 23: Top ten advertisers of (Term) life insurance products, 2011/12-2013/14
TV adspend doubles as providers look to boost product awareness
Figure 24: Advertising expenditure on (term) life insurance products, by media type, 2011/12-2013/14
A note on adspend

Channels to Market

Key points
Changes to ABI categories explained
Only around a tenth of term assurance sales were non-advised in 2013
Figure 25: Mortgage and protection term assurance premiums, by distribution channel, 2013
Intermediaries are the most significant channel for term assurance sales
Bancassurance term assurance sales suffer
Figure 26: Mortgage term assurance and protection term assurance bancassurance premiums, 2009-13

Ownership of Life Insurance Products

Key points
A quarter of consumers own term life insurance
Figure 27: Ownership of life insurance products, May 2014
Awareness of life insurance products can be improved
Consumers with higher household incomes are more likely to own life insurance
Figure 28: Ownership of life insurance, by gross annual household income, May 2014
Consumers who rent are less likely to have life insurance
Figure 29: 30: Ownership of life insurance, by housing situation and presence of own children, May 2014

Sources Consulted when Purchasing Life Insurance

Key points
The majority of life insurance policies are purchased with advice
Figure 31: Sources consulted when purchasing a life insurance policy, May 2014
Around a third of consumers consulted with bank advisers
Under-35s more inclined to use online sources to find term assurance cover
Figure 32: Sources consulted when purchasing life insurance, by age, May 2014

Arranging Term Assurance

Key points
The majority of consumers are positive about the application process
Figure 33: Arranging term assurance, May 2014
A quarter of consumers don’t find policy documents easy to understand
Consumers want quality of cover as well as low cost
Figure 34: Arranging term assurance, by Ownership of Life Insurance Products, May 2014
Under-35s are more likely to use online tools to arrange life insurance
Figure 35: Arranging term assurance, by age, May 2014
Only a quarter of consumers chose to write their plan in trust
Aggregators are well suited to selling simple products
Figure 36: Ways of arranging term assurance, by sources consulted when purchasing life insurance, May 2014

Triggers for Arranging Life Insurance

Key points
Starting a family is a major trigger for taking out life insurance
Figure 37: Triggers for Arranging life insurance, May 2014
Under-25s could be educated on how life insurance works
Figure 38: Triggers for arranging life insurance, by age, May 2014
Consumers claim an increase in income would increase consideration of life insurance
Figure 39: Triggers for arranging life insurance, by socio-economic group and current financial situation, May 2014

Amount Prepared to Pay for Life Insurance

Key points
The maximum the majority would pay for term assurance is £10-£15 per month
Figure 40: Amount prepared to pay for life insurance, May 2014
Average premiums are higher than most consumers would be prepared to pay

Attitudes towards Life Insurance

Key points
Consumers are aware of the benefits of owning life insurance, but often fail to purchase it
Figure 41: Attitudes towards life insurance, May 2014
Under-25s have a lower awareness of the benefits of life insurance
Figure 42: Attitudes towards life insurance, by age, May 2014
Parenthood changes how consumers perceive of life insurance
Figure 43: Attitudes towards life insurance, by presence of children, May 2014
Home ownership stops consumers from thinking life insurance is a luxury product
Figure 44: Attitudes towards life insurance, by housing situation, May 2014

Appendix – Market Size and Forecast

Figure 45: Forecast for new individual term assurance premiums – best- and worst-case scenarios, at current prices, 2014-19

Appendix – Ownership of Life Assurance

Figure 46: Most popular ownership of life insurance, by demographics, May 2014
Figure 47: Next most popular ownership of life insurance, by demographics, May 2014

Appendix – Sources Consulted when Purchasing Life Insurance

Figure 48: Most popular sources consulted, by demographics, May 2014
Figure 49: Next most popular sources consulted, by demographics, May 2014
Figure 50: Other sources consulted, by demographics, May 2014

Appendix – Arranging Term Assurance

Figure 51: Arranging term assurance – I chose my policy because it gave me the best level of cover I can afford, by demographics, May 2014
Figure 52: Ways of arranging term assurance – I found the application process easy when purchasing my policy, by demographics, May 2014
Figure 53: Ways of arranging term assurance – I found the policy documents easy to understand, by demographics, May 2014
Figure 54: Ways of arranging term assurance – I compared several different companies before I chose my provider, by demographics, May 2014
Figure 55: Ways of arranging term assurance – I chose to purchase my policy from a company that has a good reputation for paying out on claims, by demographics, May 2014
Figure 56: Ways of arranging term assurance – I chose to use a company that I had used before, by demographics, May 2014
Figure 57: Ways of arranging term assurance – I chose my policy because it was the lowest quote, by demographics, May 2014
Figure 58: Ways of arranging term assurance – I checked online customer reviews before I chose my provider, by demographics, May 2014
Figure 59: Ways of arranging term assurance – I found it difficult to choose between providers, by demographics, May 2014
Figure 60: Ways of arranging term assurance – I chose to place my policy in a trust so I don’t have to pay inheritance tax, by demographics, May 2014
Figure 61: Arranging term assurance, by sources consulted when purchasing life insurance, May 2014
Figure 62: Arranging term assurance, by sources consulted when purchasing life insurance, May 2014 (continued)

Appendix – Triggers for Arranging Life Insurance

Figure 63: Most popular term assurance motivators, by demographics, May 2014
Figure 64: Next most popular term assurance motivators, by demographics, May 2014

Appendix – Amount Prepared to Pay for Life Insurance

Figure 65: Maximum price non-customers would be willing to pay for life insurance, by demographics, May 2014

Appendix – Attitudes towards Life Insurance

Figure 66: Agreement with the statement ‘People with dependents should have life insurance’, by demographics, May 2014
Figure 67: Agreement with the statement ‘Life insurance provides peace of mind’, by demographics, May 2014
Figure 68: Agreement with the statement ‘It’s better to arrange life insurance when you are young’, by demographics, May 2014
Figure 69: Agreement with the statement ‘Life insurance is too expensive if you have pre-existing medical conditions’, by demographics, May 2014
Figure 70: Agreement with the statement ‘I don’t want to think about needing life insurance’, by demographics, May 2014
Figure 71: Agreement with the statement ‘Life insurance is a luxury product, rather than an essential’, by demographics, May 2014
Figure 72: Agreement with the statement ‘Having life insurance is more important than covering your personal belongings’, by demographics, May 2014
Figure 73: Agreement with the statement ‘Life insurance companies can be trusted to act in their customers’ best interests’, by demographics, May 2014
Figure 74: Agreement with the statement ‘If you’re fit and healthy you shouldn’t need life insurance’, by demographics, May 2014

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