Individual protection policy sales fell by 1.2% to 2,157,263 in 2020, according to Swiss Re’s latest Term and Health Watch report, the first fall since 2013.
The reinsurer’s data, produced in association with IPipeline, found sales were down from 2,182,610 in 2019, reversing the 5% growth in that year.
The report argued that national lockdowns and sluggish economic output may have put households off insuring themselves and their families.
There were some bright spots in the industry with standalone term insurance policy sales rising by 2.4%, and standalone critical illness (CI) cover up by 31.3% to 83,173 policies from 63,347.
However overall, new CI sales dropped by 3.3% to 521,433 with individual term policies including critical illness benefits falling by 8.9%.
And income protection (IP) was the hardest hit product set with sales down by 9.5% to 162,515 from 179,605.
Sales of guaranteed acceptance whole life policies also fell by 4.2%, and business protection sales dropped by 43.1% to 11,975 from 21,060.
Sums assured up, premiums down
Encouragingly, the average sum assured for all new term assurance sales, including term assurance with a CI benefit was £158,702, up from £157,451 in 2019 and £145,476 in 2018.
But the average annual premium for all new term assurance sales, including term assurance with a CI benefit continued to fall, hitting £355 from £372 in 2019 and £384 in 2018.
For IP, the average new annual benefit taken out in 2020 was £18,239, up from £16,594 in 2019 and £16,775 in 2018, with the average new premium also descending to £385 from £389 and £442 in the previous two years.
However, the report noted that a majority (52.6%) of new policies sold were subject to a maximum benefit payment period in claim irrespective of whether the policyholder was still unable to work at the end of that period. This figure has also risen from 46.6% in 2019.
Positive outlook for IP
Swiss Re client manager and joint author of the report Abbie Marlow noted that 2020 will always be remembered as the year Covid-19 changed our lives.
“We often see when people are under financial pressure that insurance tends to be one of the first places they look to cut costs.
“While the long-term impact of both on the insurance market remains to be seen, it’s encouraging to see that, in the main, protection sales actually fared reasonably well against such a challenging backdrop.
“Many of the difficulties faced have not gone away however, so it will be interesting to see whether peoples’ increased awareness of their own mortality and health, coupled with the resulting financial impact, leads to an uptick in demand for protection in the years to come.”
Commenting on the fall in IP sales, Swiss Re technical manager and joint author of the report Ron Wheatcroft (pictured) added: “While disappointing, this drop isn’t hugely surprising given the number of products providing a maximum benefit in claim of one or two years that were withdrawn or had restrictions applied as a result of the pandemic.
“Nonetheless, the long-term prospects for growing the income protection market alongside the increase in membership of employer-sponsored policies remains positive.
“Our study points to a number of specific opportunities for growth as the UK comes out of lockdown, particularly in the housing sector, both to protect lending and rental commitments.”