Term & Health Watch 2018 - Protect Association · Swiss Re Term & Health Watch 2018 13 Critical illness cover The number of new critical illness policies, stand-alone and acceleration

Term & Health Watch 2018

2 Swiss Re Term & Health Watch 2018

Swiss Re Term & Health Watch 2018 3

Introduction 4The market at a glance 6Term assurance 9Critical illness cover 13Income protection 16Multi-benefit applications 22Protecting the home commitments 23Whole life cover 25Growing the market 26Contacts and authors 30

Contents

Introduction

Welcome to Term & Health Watch 2018. We would like to thank product providers for contributing their data, as well as the 46 people who completed our market questionnaire, issued in March 2018. Thirty respondents work for product providers, four are independent intermediaries, the remainder being a mixture of consultants and service suppliers to the market. A number of these responses are quoted, unattributed, throughout the report. This year’s report is written against a very positive background. The prevailing mood among respondents was upbeat and positive. This is reflected in the results reported. Most respondents felt that a lot of progress had been made and were much more confident about industry prospects than in previous years.

“For me, simply the amount of innovation in individual protection during 2017 is a sign of a vibrant market; with established brands reinventing themselves and the prospect of a new insurer too.” Independent consultant

Numerous examples to reinforce this very positive market mood were cited, with an emphasis on examples of more customer-focused and broader cover, including propositions which go far beyond a payment or series of payments on death or disability,

“The industry has slowly realised that, as 7 Families proved conclusively, help insurance’ (third party benefits such as RedArc and Best Doctors) is just as important as paying out money.” Product provider

A number of product changes, too numerous to list, were mentioned. The underlying themes were of greater customer-centricity, choice and access. These developments are welcome when, perhaps more than ever before and building on whatever is arranged by their employer, consumers will need to provide for themselves as the welfare state withdraws from supporting any but the neediest.

Steps taken by industry groups to clarify the roles and responsibilities of the State and the citizen were recognised, acknowledging that this work is in its infancy and will require concerted effort over a period of years.



“It was great to see the Building Resilient Households Group effectively engage with DWP to progress discussion on the interaction of protection benefits in claim with means-tested Universal Credit.” Product provider

With society becoming much more aware of the need for greater inclusivity, whether in terms of gender, disability or other factors, respondents recognised that product providers and intermediaries have worked hard to develop better propositions to meet the needs of people who present non-standard risks for underwriting and away from what one respondent described as the “numbers game” mentality.

“The main highlight for me has been the emergence of new solutions for customers who typically find it difficult to buy insurance. Flexible plans were delivered that appreciate how a customer’s health can change over the course of a policy, and new products were launched to cater for customers with severe or multiple health conditions.” Product provider

In the chapters which follow, we report on new long-term protection sales in 2017 by separate product line. We are aware, however, that consumers do not always purchase single benefit products and that the use of multi-benefits has become more prevalent.

We are delighted that iPipeline has agreed to contribute to this year’s report. During 2017, an estimated 40% share of term and income protection business was processed through its platform. Its insights complement our data throughout, notably in areas such as multi-benefit applications. We are very grateful to iPipeline for sharing its data and thoughts. These observations appear in the text and are attributed.


The market at a glance

In 2017, 1,972,692 new term, whole life, critical illness and income protection policies were sold, an increase of 11.6% (4.9% in 2016).

All term assurances, including term assurances with CI rider benefits

2015 2016 2017% change

2016/2017

Total new sales 1,255,786 1,318,967 1,491,099 13.1

Individual critical illness

2015 2016 2017 % change

2016/2017

Accelerated policy 403,448 405,775 476,424 17.4Stand-alone policy 26,679 28,588 49,699 73.8Total new sales 430,127 434,363 526,123 21.1

Individual income protection

2015 2016 2017% change

2016/2017

Total new sales 107,302 117,814 121,084 2.8

Individual whole life

2015 2016 2017 % change

2016/2017

Guaranteed acceptance 261,137 276,164 292,047 5.8Underwritten WL 32,937 25,605 18,763 -26.7Total new sales 294,074 301,769 310,810 3.0

+13.1%

+21.1%

+2.8%

+3.0%


Top five product providers, 2017, by number of new term assurance sales, with and without CI

Product provider 2017 position 2017 2016 positionLegal & General 1 483,930 1Aviva 2 312,885 2Royal London 3 148,468 5AIG Life 4 117,001 –Zurich Life 5 96,634 4

Aviva data for 2016 in the above and below tables includes data from Friends Life.

Top five product providers, 2017, by number of new critical illness sales, including stand-alone and acceleration of life cover (also reported under new term and whole life sales)

Product provider 2017 position 2017 2016 positionLegal & General 1 131,515 1Aviva 2 126,824 2VitalityLife 3 52,375 3Zurich Life 4 50.330 –Royal London 5 46,393 5

Top five product providers, measured by number of new indivi-dual income protection sales (note that 2016 comparison is with reported Friends Life figures)

Product provider 2017 position 2017 2016 positionAviva 1 37,266 2LV= 2 20,898 1Legal & General 3 15,029 3Royal London 4 11,062 4The Exeter 5 9,671 –

Top five product providers, 2017, by number of new individual whole life sales, with and without a CI rider, including guaranteed acceptance, non-linked and unit-linked

Product provider 2017 position 2017 2016 positionSunLife 1 126,857 1Royal London 2 48,146 5Scottish Friendly 3 37,077 3Legal & General 4 31,573 2One Family 5 16,831 –

2017 in more detail


Total new term assurance sales increased by 13.1%.

The number of term life cover only new policies increased by 11.1%.

The number of term life cover with critical illness increased by 18.2%.

New term sales with a CI benefit represent 31.9% of total new term sales.


Term assurance

It is great news to report an extremely healthy increase in total new term assurance sales. These increased by 13.1% in 2017, the highest level of new sales reported since 2010.

Total new term sales split between term and term with CI, 2013–2017 by volume

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

Term with CI

Term

20172016201520142013

Term only Term with CI

1,216,6491,279,448 1,255,786

1,318,9671,491,099

The split of total new individual term sales by product type is as follows;

Total new individual term sales split by level term assurance (LTA), decreasing term assurance (DTA), family income benefit (FIB) and other term new sales, 2013–2017 by volume

Product type 2013 2014 2015 2016 2017% change

2016/2017

LTA without CI 508,884 522,649 555,907 594,216 664,317 11.8Relevant life – 16,372 21,790 27,746 29,349 5.8LTA with CI 201,502 211,694 203,945 201,614 255,564 26.8DTA without CI 234,492 239,001 225,582 247,213 277,272 12.2DTA with CI 220,487 232,043 196,174 199,253 212,316 6.6FIB without CI 29,417 25,748 24,680 25,803 20,640 –20.0FIB with CI 1,022 2,770 2,854 2,599 1,743 –32.9Other term without CI 20,836 29,165 24,766 18,311 23,220 26.8Other term with CI 9 6 88 2,212 6,678 201.9Total 1,216,649 1,279,448 1,255,786 1,318,967 1,491,099 13.1

Term only 2013: 793,629 2014: 832,935 2015: 852,725 2016: 913,289 2017: 1,014,798

Term with CI 2013: 423,020 2014: 446,513 2015: 403,061 2016: 405,678 2017: 476,301

+13.1%


Total new individual term sales by distribution channel, 2013–2017 by volume

Distribution channel 2013 2014 2015 2016 2017% change

2016/2017

Directly-authorised 759,492 891,415 868,629 897,963 1,062,192 18.3Tied 172,825 117,169 149,244 173,271 181,314 4.6Direct 45,563 36,586 115,663 141,384 173,274 22.6Bancassurance 238,769 234,278 122,250 106,349 74,319 –30.1Total 1,216,649 1,279,448 1,255,786 1,318,967 1,491,099 13.1

The split of distribution by product type is as follows.

Distribution by product type, 2017, by volume

Directly-authorised Tied Direct Bancassurance

Level term, excluding Relevant Life Policies

515,428 55,584 84,336 8,969

Relevant Life Policies 27,040 2,256 10 43Level term with CI 167,673 40,791 41,263 5,837Decreasing term 175,309 41,853 26,161 33,949Decreasing term with CI 141,073 36,738 9,468 25,037Other term 10,918 726 11,576 0Other term with CI 6,109 559 0 10Family income benefit 17,390 2,382 459 409Family income benefit with CI 1,252 425 1 65

The average new sums assured for all new term assurance policies, including term with CI, for 2013 to 2017 was as follows.

Average new sum assured (£), all term sales, including term with CI, 2013–2017

0

40,000

80,000

120,000

160,000

20172016201520142013

123,868132,968

139,360144,132 145,966

Term assurance


The new average sum assured by product type was.

New average sum assured by policy type, (£), all term, with and without CI, 2017

Product Average new sum assured, £, 2017

Level term, excluding Relevant Life Policies 148,530Relevant Life Policies 429,754

Level term with CI 93,627Decreasing term 180,429Decreasing term with CI 128,742Other term 182,967Other term with CI 85,788Family income benefit 19,182 p.a.Family income benefit with CI 13,603 p.a.

The average new premium for all new term assurance policies, including term with CI, for 2013 to 2017 is as follows.

Average new annual premium (£), all term sales, 2013–2017

0

100

200

300

400

500

20172016201520142013

376 389 396 394 397

The new average premium by product type was.

New average premium by policy type, (£), all term, with and without CI, 2017

Product Average new sum assured, £, 2017

Level term, excluding Relevant Life Policies 319Relevant Life Policies 945

Level term with CI 465Decreasing term 285Decreasing term with CI 608Other term 345Other term with CI 610Family income benefit 260 Family income benefit with CI 885



Critical illness cover

The number of new critical illness policies, stand-alone and acceleration of life cover combined, increased by 21.1%. This was the highest level of new sales reported since 2012.

Total new individual CI sales, 2013–2017 by volume

0

100,000

200,000

300,000

400,000

500,000

600,000

20172016201520142013

434,363445,679 465,439430,127

526,123

Stand-alone CI sales rose by 73.8% but acceleration of life cover accounted for 90.6% of total new CI sales.

New individual stand-alone CI and CI written as an acceleration of life cover, 2013–2017 by volume

Product type 2013 2014 2015 2016 2017 % change 2016/2017

Term with CI 423,020 446,513 403,061 405,678 476,301 17.4Whole life with CI 653 718 387 97 123 26.8Stand-alone CI 22,006 18,208 26,679 28,588 49,699 73.4Total 445,679 465,439 430,127 434,363 526,123 21.1

The distribution mix for new CI sales is as follows. The reported increase in new sales is primarily a result of reported growth in business through directly-authorised firms and direct to consumer.

Total new individual CI sales split by distribution channel, 2013–2017 by volume

Distribution channel 2013 2014 2015 2016 2017% change

2015/2016

Directly-authorised 268,809 319,197 304,629 303,932 345,515 13.7Tied 45,631 39,246 64,117 73,025 86,505 18.5Direct 5,548 5,663 18,601 17,435 55,332 217.4Bancassurance 125,691 101,333 42,780 39,971 38,771 -3.0Total 445,679 465,439 430,127 434,363 526,123 21.1

+21.1%


Average new sums assured for all CI sales for the period 2013-2017 are as follows. The split showing the average sum assured by term products with CI is shown in the previous chapter.

Average new sum assured (£), all CI sales, 2013–2017

0

20,000

40,000

60,000

80,000

100,000

120,000

20172016201520142013

91,98399,589

107,474 104,585 106,254

Critical illness

iPipeline commentVia the iPipeline platform, we’ve seen an increase in the amount of CI written based on condition coverage, largely as a result of the launch of Aviva’s upgraded CI plan at the end of 2016. Critical Illness is less price-sensitive than other product lines, with 40% of CI policies written through iPipeline during 2017 being the cheapest product available. This however varies across client segments – middle-aged clients are the least likely to purchase the cheapest product. Unlike Income Protection, CI has not seen a move towards more ‘simplified’ plans.



Income protection

For the fourth year running, we are reporting an increase in the number of new individual income protection policies.

The number of new income protection policies increased by 2.8% (9.8% in 2016).

Total new individual IP sales, 2013–2017 by volume

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

20172016201520142013

117,814

90,79496,889

107,302

121,084

48.8% of new policies provided a limited benefit duration on claim (50.2% in 2016).

While this may provide more affordable cover for people living with stretched budgets, these products do not address the needs of the very long-term disabled who presumably fall back on to the State once their savings and assets mean that they are eligible to do so. As working lives are extended, and are likely to continue to do so into the future, we may be failing to deal with the very real issues which prolonged disability could present. This whole issue is likely to be exacerbated as Government expenditure is more tightly managed and as growth in renting impacts the industry’s traditional reliance on mortgages as a source for new business.

Income protection sales, by maximum benefit payment term, 2015–2017, by volume

Benefit duration 2015 2016 2017IP (excluding LPT) 66,167 58,661 62,053

IP one year maximum payment term 2,383 3,314 6,193IP two year maximum payment term 33,271 46,041 41,573IP five year maximum payment term 2,360 1,948 8,211IP ‘other’ payment term 3,121 7,850 3,054


iPipeline comment Limited Benefit Plans accounted for over half of standalone income protection business as written through the iPipeline platform during 2017. 93% of these policies feature a two-year maximum payment term.

On the one hand, the emergence of these products may represent a risk of an under-protected workforce, with full term policy claims often exceeding two years. However, these products are typically sold to low income households, often working in low grade occupations. Given that premiums for such plans are on average 45% cheaper than full payment term products, is reduced pay out a necessary step to get more of the UK workforce protected? As limited benefit income protection has grown, there has also been a significant change in the type of policies being written. More income protection is being sold within ‘multi-benefit’ plans – single policies covering benefits across Term Life, Critical Illness, Income Protection or Family Income Benefit.

During 2017, 30% of Income Protection policies sold through the iPipeline platform formed part of such plans, up from 15% in 2016, and 5% in 2015. In the first quarter of 2018, this has risen further to 35%.

Many of these multi-benefit income protection sales were alongside Decreasing Life/Critical Illness cover, providing a fixed benefit to cover living expenses alongside mortgage cover. Whilst the cover amounts are broadly similar across single-benefit/multi-benefit income protection, average client salaries are higher when written within a multi-benefit plan. This indicates that, alongside the growth in limited benefit plans to lower income households, income protection is also increasingly being sold as a rider within more comprehensive policies to higher income households.


The average new annual benefit for 2013 to 2017 is as follows.

Average new annual benefit, (£), 2013–2017

0

5,000

10,000

15,000

20,000

20172016201520142013

14,73715,993

13,950 13,908 14,369

The average new benefit for policies providing benefits payable up to retirement and for a maximum two year benefit term was as follows.

New average benefit per annum, (£), “to retirement” and maximum two year benefit payment period, 2016–2017

Maximum benefit payment duration 2016 2017“to retirement” 15,438 17,334

Two years 12,889 13,446

Income protection


The average new annual premium for 2013 to 2017 is as follows.

Average new annual premium (£), 2013–2017

0

100

200

300

400

500

20172016201520142013

449 465425 431 445

The average new annual premium for policies providing benefits payable up to retirement and for a maximum two year benefit term was as follows. Note that age-banded products may distort these figures, with premiums rising throughout the policy term.

New average premium, (£), “to retirement” and maximum two year benefit payment period, 2016–2017

Maximum benefit payment duration 2016 2017“to retirement” 517 527

Two years 352 385


Income protection

iPipeline comment We believe affordability is a key driver behind the growth of Limited Benefit Payout Plans – the average monthly premium for such policies written in 2017 was £23, compared with £56 for full Income Protection plans.

Sales have been strongly linked with socioeconomic group; the average salary for policies written with a limited payout in 2017 was 40% lower than for “to retirement” products. The types of clients that purchase these products are generally less affluent, and work in lower grade occupations. Age-banded product sales have also risen – the difference here is that whilst initial premiums are lower, it can end up costing more over the policy term. These policies are typically being sold more often to clients with higher risk occupations, and as such the average premium for an age-banded limited payout plan in 2017 was £27, higher than ‘level’ limited benefit plans.



Multi-benefit applications

For the first time, and with thanks to iPipeline for providing its data, we are able to show information on the number of multi-benefit plans. iPipeline has contributed the whole of this section.

As reported above, over a third of income protection business was written within multi-benefit plans in Q1 2018, this is via SolutionBuilder®, enabling advisers to easily compare single against multi-benefits in a single view. More generally, we witnessed a significant increase in the proportion of total protection sales written to multi-benefit plans. In Q1 2018, 17% of protection transactions contained two or more benefits, up from just 5% in 2015.

During 2017, the average annual premium for plans which contained two or more benefits was £790. The top benefit combinations in 2017 were as follows (accounting for 35% of total multi-benefit policies written): ̤ Two Level Life benefits ̤ Level Life with Decreasing Life ̤ Level Life with Level CI ̤ Income Protection with Decreasing CI ̤ Two Income Protection benefits with Decreasing CI.

Utilising the ability to quote multi-benefit, advisers are now able to model different product options and create richer protection plans tailored to consumer needs. For example, using multi-benefit plans two lives can be covered, with Income Protection as a rider, and mixes of benefits spanning different terms. In 65% of policies containing both level and decreasing life cover, the different benefits had different terms. A large amount of these multi-benefit policies were mortgage-related, with 60% of plans written containing a decreasing life or CI benefit.

Consumers have, on average, saved 6% on total premiums through policy fee discounting as well as benefiting from one application process. When considering benefit types, Family Income benefit was the stand-out, with over half of such policies written during 2017 being within multi-benefit plans:

Benefit Type % Policies Multi-Benefit

Family Income 54%Decreasing Life 31%

Income Protection 30%Decreasing CI 21%Level CI 19%Level Life 17%

Almost one-third of Decreasing Life policies written through iPipeline during 2017 formed part of a multi-benefit plan. Over half of these policies comprised Decreasing Life written alongside a Level Life or CI benefit, with Income Protection also forming part of these plans in 30% of Decreasing Life cases. When analysing distribution segments, mortgage brokers wrote the highest rates of multi-benefit new business during 2017, at almost 25% of policies through this channel.


The mortgage sector has traditionally been a key source of new protection business, at one time close to 50% of new life assurance policies being mortgage-related.

Stretched rentersSince 1991, the owner/renter landscape has shifted with more and more families growing up in rented accommodation, and fewer households being mortgaged:

Home ownership statistics 1991 and 2017 (English Housing Survey)

Maximum benefit payment duration 1991 2017% of homes owned outright 25% 34%

% of homes mortgaged 43% 28%% of homes privately rented 9% 20%

Households in the private rented sector, 1992, 2008 and 2016/17 (English Housing Survey)

Year Number of rented households

1992 1.7m2008 2.9m

2016/17 4.7m

Protecting the home commitments

The seismic shift in home ownership for younger generations and its implications cannot be ignored. The above numbers speak for themselves. The emergence of ‘Generation Rent’ means that families are finding themselves in rented accommodation for a longer period of time than previous generations. The average age of first-time buyers has increased from 30 in 2006/7 to 33 in 2016/17. It’s not just single professionals, 38% of privately rented households in 2016/178 have dependents. Traditional protection sales triggers are now happening later in life, if at all.

iPipeline carried out research in conjunction with Holloway Friendly, gaining insight from 1,000 tenants and 100 letting agents on the need to protect renters. The research findings validate that tenants need greater security, with only 30% of respondents reporting they have sufficient savings to cover more than three months’ rent. Worryingly, there appeared to be some misunderstanding on the level of protection received from existing products and state provision. 27% of

respondents suggested the state would support to cover their rent. This highlights a lack of awareness of the reality that Statutory Sick Pay (SSP) would pay out £390 per month for 28 weeks, compared with an average rent of £650. Furthermore, this doesn’t vary across regions – in London the average rent is £1,100 more than SSP.

Protection products need to be both simple and affordable, with price being the main reason given by respondents for not taking out cover. Budgets are stretched, with the average deposit for first-time buyers now standing at £25k. Whilst an extreme example, in London 50% of salaries are spent on rent, on average. However, the average limited benefit plan sold through iPipeline services would cost just 2% of the average rent with a four-week deferred period. The average policy cost for a two-year pay out plan, covering the average rent (for a 30-year-old low risk occupation), would be under £10 a month.


Recent industry data suggests there is growth in mortgages to first-time buyers as tax changes take hold. A large portion of the UK population will, however, remain in the private rental sector for years to come, with 40% of renters ‘expecting to buy’ believing this will be at least five years away. The protection industry has an opportunity to provide a vital lifeline to almost 5m households

Stretched BorrowersThe emergence of ‘Generation Rent’ has come at the expense of mortgaged households. 28% of households in 2016/17 had a mortgage, down from 42% in 1991. At the same time, more homes are being owned outright – baby boomers find themselves attaining record levels of household wealth whilst their children struggle to buy their first home. Whilst ‘the bank of Mum and Dad’ is becoming one of the nation’s largest lenders, this is not a sustainable solution to helping first-time buyers.

With fewer first-time buyers, the inference is that more protection is being sold alongside remortgaging. As mortgage durations have risen, there has been a parallel increase in durations for Life and CI policies written through iPipeline services. In 2017, 35% of policies written had a term of at least 30 years, up from 18% in 2012.

Whilst longer terms can make mortgage payments more affordable (even if more is paid over the length of the policy), the converse is true for protection products. The average life cover premium for a 30-year-old, non-smoker, applying for £200,000 sum assured, rises by 10% when the term increases from 25 to 30 years.

Data collected by Swiss Re for this and previous reports indicate the extent to which the market is dependent on mortgage-related business. The number of new decreasing term assurance (DTA) policies written over the period from 2013 to 2017 was as follows.

New decreasing term and decreasing term with CI policies, 2013–2017, by volume

2013 2014 2015 2016 2017

DTA without CI 234,492 239,001 225,582 247,213 277,272DTA with CI 220,487 232,043 196,174 199,253 212,316

Protecting the home commitments


Whole life cover

A number of variations, based on whole of life cover, are available: ̤ Guaranteed acceptance plans, usually – but not always – targeted at the over 50s

market or with the express purpose of paying for a funeral or expenses on death. ̤ Fully-underwritten non-linked products, such as those designed to mitigate

inheritance tax. ̤ Unit-linked products.

Since the uses of the cover vary widely, we have drawn comparisons separately based on guaranteed acceptance and underwritten business. In practice, analysing the aggregated data has little relevance.

New WL sales, unit-linked, non-linked and guaranteed acceptance plans, 2013–2017, by volume

Product type 2013 2014 2015 2016 2017

Guaranteed acceptance 246,326 243,181 261,137 276,164 292,047Non-linked underwritten 26,441 30,092 32,550 25,508 18,640Unit-linked underwritten 656 718 387 97 123

The average new sum assured for whole life policies is as follows.

New whole life average sum assured by product type, (£)

Product Type 2017

Guaranteed acceptance 4,151Non-linked underwritten 128,156

Unit-linked underwritten 84,681

The reported new average sum assured for underwritten whole life policies masks a wide variation by company provider between £10,777 and £342,087 and no product has an average sum assured for its business within £10,000 of the market average overall.

The recent consultation published by the Office of Tax Simplification to support its simplification review of inheritance tax may stimulate greater interest in how liabilities can be insured. From the data we have, we estimate that no more than 4,000 new policies were taken out in 2017 to meet inheritance tax liabilities.

The number of new guaranteed acceptance plans increased by 5.8%.

The number of new non-linked underwritten whole life policies, unit-linked and non-linked, decreased by 26.7%.


The results in this year’s report are impressive. After many years of growth only matching inflation at best, it is encouraging to see good levels of growth with close to two million new policy sales in 2017.

More and more, the preferred access point for consumers is through directly-authorised firms and, increasingly, direct channels. To some extent, the data understate the growth of direct business since product providers are not required to hold data showing how much of their new term assurance business has been completed by directly-authorised intermediaries on a non-advised basis.

The underlying market mood suggests that the market is well-placed to address the challenges faced from ever-demanding customers whose need for private provision will be greater than ever before. There is, though, much to do if we are to make it simple to support consumers and businesses by making them more resilient to financial shocks.

Make self-provision payWe need to work with the Government and regulators to remove unnecessary barriers to a model which ensures that self-provision pays. Currently, this is not always the case, particularly with the application of Universal Credit to private disability benefits. Concern about this, natural reluctance of the Government to be open about the shortcomings of State provision and the need for a better offset were mentioned frequently in the responses to our market questionnaire, with strong endorsement for the work of the Building Resilient Households project.

“Universal Credit is a hugely complex system that will have implications of customers, advisers and providers. I would like to see the Government work with providers to ensure that customers are not penalised for protecting themselves against the impacts of illness and injury.” Product provider

“Any government is always reluctant to say it cannot provide. But that is the reality and the requirement for self-provision needs to be more explicit. If people understand their own self-protection gap they can do something about it. Currently, people don’t understand the risks they are exposed to and, therefore, don’t do anything about them. Ignorance doesn’t help.” Product provider

“It’s vital that the current Universal Credit means-testing rules are reviewed and changed to ensure that where terminal illness, critical illness and/or income protection claim benefits are being utilised to pay mortgage and/or rental costs, utility bill costs, council tax costs, child care costs, broadband, childcare and car lease costs that they are disregarded from means-testing - 75 years after Beveridge placed his vision of a modern welfare state before Parliament, this is true to his vision in having a welfare safety net for all but, encouraging those who can, to be “entrepreneurial” and take steps to build on this.” Product provider

Our view remains that, despite the growth in new income protection sales reported earlier, this continues to be the biggest barrier to widening disability coverage.

VulnerabilityOne of our biggest challenges may, though, come from how we are seen to treat customers who might be considered to be vulnerable. This theme, which began with the FCA work looking into access to travel insurance for cancer sufferers, is likely to look beyond the narrow issue linked to travel when the FCA issues its response, expected in summer 2018.

The market has taken great strides forward in meeting the needs of the “non-standard” applicant. A number of respondents were very positive about specialist protection intermediaries working to obtain cover for people who

Growing the market


present complex or non-standard risks, coupled with greater provider choice.

Yet, the concern remains that too many people fail to apply for protection cover as they believe their health status will mean that they will be declined. A further group may find the barriers to obtaining cover too difficult to overcome. For instance, presented with an overload of information from the internet, they may just not know where to look.

“We still need advice for vulnerable people. They need to be supported through the process of protection, otherwise they may end up with no protection at all. It is hard to build up the trust we need in a product for vulnerable customers when it is digital and direct to customer.” Product provider

“We have to improve access to cover for applicants with existing conditions, eliminate outdated assumptions about mental illness and develop more flexible propositions to allow for earnings fluctuations.” Independent consultant

Vulnerability does not just equate to frailty and consumers will present different stages of vulnerability throughout their lives. We will need greater innovation to address these issues as they emerge. For example, this could be a result of changing working and retirement patterns which may leave a shortfall between the termination of life and disability cover and the end of financial commitments. These changes may have been unthinkable when some long-standing cover was first put in place.

“The industry needs to look again at whole of life cover to provide continuing protection into what was once the traditional retirement phase of life.” Independent consultant

“The make-up of the UK job market is changing – women are entering the workforce in larger numbers than ever before. Many will require flexible jobs to balance their work life with raising a family. To help, providers need to support women with flexible protection solutions that match their personal needs.” Product provider

A number of responses praised propositions from firms which collaborate with and signpost to charities and specialist agencies as well as using the services of businesses such as RedArc or Square Health.

While there is much to praise, it is a sad fact that no more than 10% of the UK workforce has insurance protection against the loss of income as a result of prolonged disability and that the lowest growth in percentage terms was reported for individual income protection sales. With the households’ saving ratio’ falling to an annual record low of 4.9% in 2017, the lowest since records began in 1963, this then feeds through into lower financial resilience.

“Financial resilience’ should be a statement that is heard often, spoken by the Government, by banks, by insurers, by estate agents. Anyone who deals with financial services or the purchase or rental of a home.” Product provider

“Learning the lessons from the Money Advice Service and plethora of financial education initiatives over the years, it is important that our new Single Financial Guidance Body (SFGB) is made accountable for improving financial resilience to income shock with this accountability being clearly measurable. It is also important that clear direction and priorities are set for the new body and it makes sense to have an independent and broad based Financial Protection Task Force established quickly to do this from the new guidance body get-go.” Product provider


Our questionnaire indicated limited industry awareness of the SFGB. Awareness may grow as the leadership and structure of the new organisation are developed.

Among those who were more aware, there were calls for it to have a role in improving protection against income shocks. Linked to comments about universal credit, improving understanding of how the benefit system and private provision join together was seen as key as well as highlighting emerging areas of risk, such as renters, partners living together, the lack of a will and living from day to day with no savings.

“Living from day to day seems to be the lifestyle choice of many, and living day to day and in the moment is much more common than the considered and cautious way of our parents and grandparents. Either we make it easy for people to choose this lifestyle, and protect that... easily; or we encourage them to live their live in a more considered and forward thinking way. I think the latter is not likely to be achieved across enough people to make a difference.” Product provider

Social careA Green Paper on social care funding expected before the summer recess presented an opportune moment to seek views on the role, if any, that market opinion formers foresaw for long-term protection products and services. It was generally recognised that this is a growing issue, albeit a history of successive Governments failing to deliver over more than 20 years was mentioned frequently.

“There is a role here, but first government policy on social care needs sorting (once and for all).” Product provider

“A re-think is needed – what are the real options when the Government cannot get its act together. The Government needs to stop moving the goal posts: then the industry can start actually developing solutions.” Independent consultant

While planning and preparing for care costs was seen as important, few saw the current limited propositions as sufficient to address consumer needs even if consumers could be persuaded to prioritise over other needs. What can be done using or adapting existing product types will be very limited until the Government is open about where responsibility for meeting care costs falls between the citizen and the State and the infrastructure to deliver this.

This may or may not include the value of the home within the assessment of the individual’s assets. For the next generation, this will become less of an issue in the event that the current trend to rent is not reversed.

Whether it is for the long-term protection market to deliver products and services is a moot point. Although awareness is growing that the end consumer is likely to bear greater responsibility for care costs in the future, there will need to be a clear market opportunity to support greater innovation and product choice.

“I think it’s possible... but we struggle to encourage awareness of simple life cover... I’m not sure the buying public is ready for this type of product (unfortunately).” Product provider

Growing the market


Protection specialist intermediaries should be able to advise on pre-funding options without obtaining the specialist qualification or COBS authorisation which are rightly needed when advising customers close to or at the point of going into care. Even then, it is not likely that such products will have mass market appeal or priority when set against shortfalls in life assurance and disability cover.

“Long term protection products undoubtedly do have a role in supporting social care, however, I guess that people will still continue to rely on rearranging their current assets at the point of need. With so many other things to save for, not least retirement income, it is difficult to see people purchasing insured long term care plans in any great quantity, particularly as it covers something that may not occur.” Independent consultant

“The problem with social care dwarfs the other issues from an urgency perspective.” Product provider


Contacts and authors

Krupa ShamjiSenior Communications Business [email protected] Phone: +44 20 7933 4010

For further information, please contact:

Authors

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Chloe studied Economics at the University of Cape Town before moving north to take up a position as Senior Research Assistant in Monetary Analysis at the Bank of England.

She joined Swiss Re on the Graduate Programme last year and has been involved in Life & Health new product developments and assisting on legislation and regulation analysis. She is passionate about attracting fresh and diverse talent into the insurance industry and has published an article on this topic in Cover magazine. She has also spoken on this topic at University Career Fairs on behalf of Swiss Re.

Outside the office, Chloe is on a quest to avoid London complacency, attending all the live music, exhibitions and theatre she possible can. She hopes to do the same while on secondment this summer to Swiss Re’s New York office.

Chloe GilbertClient Markets Analyst [email protected]: +44 20 7933 4862

Ron works with the market, looking at the likely impact of legislation and regulation. He is a regular commentator in the media.

He is a Board Member of the Investment & Life Assurance Group, a member of GRiD’s Regulations Committee and Growing the Market Working Party, and the ABI’s Social Care Working Party.

He has recently been appointed Chairman of the European Knowledge Tree Group, an organisation founded in 2010 and based at the London School of Economics, to advance and enrich eHealth in all its forms.

Outside work, Ron chooses to ignore Premiership hype, settling instead for watching Gillingham in League One and the sober reality of seeking mid-table mediocrity as an escape from the prospect of away matches in far-flung places in League Two.

Ron WheatcroftTechnical [email protected]: +44 20 7933 3548Follow me on Twitter: @RonWheatcroft

iPipeline is a leading provider of cloud-based software and e-commerce solutions for the life insurance industry. Through our SaaS solutions, we accelerate and simplify insurance sales, compliance, operations and support. We provide process automation and seamless integration between every participant in the life insurance industry including insurers, bancassurance, intermediaries and consumers. As a result, this provides us with a protection data hub allowing for rich data analytics through our InsureSight® service, providing the industry with deep market understanding and models to help predict client behaviours.

To find out more visit: http://www.ipipeline.com/uk or contact us at [email protected]

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Swiss Re Europe S.A., UK branch

Title: Term & Health Watch 2018

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The material and conclusions contained in this publication are for information purposes only, and the authors off er no guarantee for the accuracy and completeness of its contents. All liability for the integrity, confi dentiality or timeliness of this publication or for any damages resulting from the use of information herein is expressly excluded. Under no circumstances shall Swiss Re Group or its entities be liable for any fi nancial or consequential loss relating to this publication.

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