The decline in individual protection sales in 2022 indicates the sector is levelling back to normal numbers, according to the author of Swiss Re’s latest Term and Health Watch report.
The latest report showed individual protection insurance sales in the UK fell by 7.8% in 2022 – reversing the rebound the market experienced in 2021.
The 2022 report, produced in conjunction with IPipeline, found that a total 2,114,559 new term, whole life, critical illness, and income protection policies were sold in 2022. This compared with the 2,293,704 policies purchased in 2021, up from 2,157,263 in 2020 and more than 2.18 million individual policies purchased in 2019.
Cocktail of issues
Speaking to Health & Protection this week, the report’s author Joanna Scott, technical manager and industry affairs manager life and health UK and Ireland at Swiss Re, maintained that this year’s decline was perhaps an indicator of a return to normal.
“There is a bit of a cocktail of things going on with inflation that we haven’t seen in decades, pressure on households, the broader budgetary pressures,” Scott said. “And also interestingly, when you compare it to 2019, we’re pretty much on the level of 2019 numbers.
“With 2020, we saw a bit of a dip with the impact of the pandemic and we viewed 2021 as the bounce back where a lot of new business applications were then feeding back through after the pause of the pandemic, with delays in medical evidence and things like that.
“So, perhaps we’re levelling back to normal numbers so it’s not potentially as much of a decrease when you compare it to the last five years. It is helpful as we can look at the reports going back quite far.”
The report also noted that 2022 bucked the trend towards term assurances being sold through non-advised sales channels.
While the 2021 report showed that more than 50% of level-term sales were sold on a non-advised basis, this fell to 42% in 2022.
The report’s authors commented that customer appetite to take cover without advice usually runs in line with how complex the product’s proposition is.
“This is demonstrated by non-advised sales for level term assurance dwarfing the 8% for decreasing term assurance with CI,” the report continued. But “anecdotally, greater regulatory controls and a contraction of the market for distribution leads may be impacting some of the non-advised market activity.”
Impact of Consumer Duty
But Scott told Health & Protection that the Financial Conduct Authority’s incoming Consumer Duty was starting to affect how individual protection is sold.
“Even in the 2022 numbers, we saw a bit of an impact when it came in the distribution splits… just in the drop of non advised sales in comparison with advised.
“I think it is a really good thing to pick between the distribution channels – but potentially even looking into this year with the government’s ban on cold calling and things like that, that could also have an impact on the way some companies are selling protection and things like that.
“But definitely, the Consumer Duty is there to raise the bar for everyone and I think even if people are selling better business, that’s good for everyone. I think definitely it should have a positive impact on the protection market.”
Continued resilience of adviser market
According to Ron Wheatcroft, technical manager of life and health for UK and Ireland at Swiss Re, the Consumer Duty also presents the perfect opportunity for advisers to revisit existing in f,orce business and carry out reviews with customers.
And one of the areas advisers could review, Wheatcroft suggested, is around policy ownership which Swiss Re is looking into following the release of its report in February into the take up of trusts on beneficiary nomination.
“We think policy ownership is really going to come to the fore,” Wheatcroft continued. “It just raises professionalism where policy ownership is secured. Who do you want the money to go to? and making sure it happens.
“I think advised businesses do start in a much better place to make that happen. So it’s another good opportunity for advisers just to go back and do a refresh with clients and who knows? It might mean that they get some more business leads and opportunities as well. But we’ll be publishing probably in the next few weeks.
“At the moment it’s looking like July and we’re just going to provide some updated numbers and thoughts on that – so it’s one to look out for. The data was actually collected with the Term and Health Watch data but for various reasons, we decided to hold it back into a separate publication.”