Life Assurance in the UK, Key Trends and Opportunities 2017

The term life assurance category shows resilience throughout challenging economic conditions with the industry looking to record modest growth over the coming five years.

New business premiums in the term life assurance category grew by 7.7% in 2012, accompanied by an increase in mortgage-related protection sales. Term life assurance (excluding accelerated critical illness benefit) dominated the UK long-term protection market, accounting for 26.8% of the total new business regular premium in 2012. Household finances continued to be squeezed, which reduced the demand for discretionary term life and other protection products. The fall in mortgage lending led to a decline in sales of term life policies taken out with interest-only or repayment mortgages. The term life assurance category remained resilient, however, recording a compound annual growth rate (CAGR) of -2.53% during the review period (2008-2012).

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Level-term assurance products, offering the same level of cover throughout the period of the policy, accounted for 72.2% of the total term life new business premiums. Decreasing-term assurance policies, usually purchased by individuals who may only wish to protect their mortgage, represented 27.8% of the total new business premiums. Despite the difficult economic background and mortgage market instability, life insurers delivered a steady volume of new business in both the level and decreasing-term assurance sub-categories during the review period. 

Improved consumer confidence, increased life expectancy and a gradual recovery of the mortgage market are expected to encourage growth in the term life category over the forecast period.

Companies and advisers will, however, face a challenge in raising awareness of the role of life insurance and protection play in creating a financial safety net for families. The term life assurance category is therefore forecast to expand at a modest CAGR of 2.6% over the forecast period (2013-2017).

Independent financial advisers (IFAs) and other advisers are likely to shift their attention towards term life and other protection business, since a commission ban for the sale of investment-related products was introduced as a result of the Retail Distribution Review (RDR). Non-advised channels are expected, however, to increase their presence in the post-RDR world. A number of life insurers and high street banks have already stopped offering mass-market investment and protection advice through their branches. The simplicity of term life assurance makes it an easy product to purchase and understand which is expected to increase the role of aggregators, retailers, online and telephone-based sales channels in the distribution of term life policies. The role of advisers, however, is likely to remain prominent in giving advice on more complex protection menu alternatives.

 

Reasons to buy:

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