Individual protection insurance sales in the UK increased by 6.3% in 2021 – indicating a rebound for the market following a tough year in 2020, according to Swiss Re’s latest Term & Health Watch report.
While the 2020 figures showed individual protection policy sales fell by 1.2% to 2,157,263 over the year – the first fall since 2013 – the latest report makes for much more welcome reading.
It shows 2,293,704 new term assurance, whole life, critical illness and income protection policies were purchased in 2021, compared with 2,157,263 in 2020 – an increase of 6.3%.
The report also showed the market reached its highest level of new business since 2004 in 2019, with more than 2.18m individual policies purchased during this period.
Improved mortgage market a key driver
According to the report’s compliers, an improved mortgage market was a key driver for recovery following its effective closure for a number of months in 2020.
The report also shows new individual term assurance sales including accelerated critical illness (CI) rose 7% from 1,587,829 to 1,698,301 which comfortably outstripped the 2019 pre-pandemic figure of 1,602,170.
New individual CI sales rose 11.5% from 521,433 to 581,658, well above the 539,312 in 2019, and income protection (IP) sales were up 8.9% from 162,515 to 176,965 but remained just under the 2019 level of 179,605.
More than half (50.3%) of all new level term policies were purchased without advice, up from 49.9% in 2020.
Market gradually tiptoeing back
Abbie Marlow, client manager at Swiss Re and a joint author of the report, said: “The market is gradually tiptoeing back, with most business lines displaying positive growth or even sitting ahead of where they were in 2019.
“But while the numbers are undeniably encouraging, cautious optimism is the order of the day when it comes to market growth.”
She noted that perhaps the most critical factor right now for future market confidence was current public sentiment.
“In the shorter term, the consumer caution caused by weakening UK economic conditions may affect end-customers’ decisions around existing commitments, including insurance products,” Marlow continued.
“This in turn could impact new protection sales over the coming period.”
Compilers also pointed to wider challenges for the industry posed by the report’s findings such as the fact that three times more CI policies were purchased than IP, while average new sums assured for men were higher across term, CI and IP when compared with women.
New average sum assured, split by gender, 2021, males and females
|
|
Males 2021 (£) |
Females 2021 (£) |
|
Level term assurance (LTA) without CI |
183,296 |
163,413 |
|
LTA with CI |
88,314 |
63,973 |
|
Decreasing term assurance (DTA) without CI |
180,501 |
177,331 |
|
DTA with CI |
130,433 |
118,629 |
|
Income protection |
19,275 p.a. |
16,896 p.a. |
Disappointing business protection and relevant life numbers
Ron Wheatcroft, technical manager, life and health UK and Ireland at Swiss Re and one of the joint-authors of Term and Health Watch 2022, (pictured) said: “The growth in individual CI sales has been particularly pleasing and is, in part, a reflection of the revival of the mortgage sector in 2021.
“Critical illness sales continue to dwarf those of income protection policies – despite protecting incomes being a clear industry priority.
“This, of course, may be partly due to more people having their income protected through a workplace arrangement than those who purchase critical illness cover through work.”
While the study indicated an increase in business protection numbers in 2021 following a 43.1% drop between 2019 and 2020, the increase was by only 2.0%.
Picking up on this point, Wheatcroft added: “Business protection and relevant life numbers continue to disappoint, a sign that smaller firms have found taking on new commitments more difficult in the pandemic and its aftermath.
“Against the current uncertain backdrop, however, business retention strategies should be at the fore in supporting businesses and consumers to keep their protection products and benefits going.
“Opening up greater access to protection will be all the more critical moving forward as the industry has to be more inclusive.”
Swiss Re has set up a group, named Building Resilient Businesses, to look at ways to support awareness and market growth, including through the use of signposting services.
Wheatcroft concluded: “There is no doubt that the use of signposting is a way to expand opportunities for all our customers and potential customers and make the market more customer-centric – whereas historically it has been aligned more to the legislative and regulatory framework under which we operate.
“Nowhere is this more apparent than in the industry’s dealings with its corporate customers.”