Swiss Re survey reveals increased sales of UK term assurance, critical illness and whole life insurance; income protection sales fell. Strong need to address life assurance and income protection gaps

09 June 2010, London

Swiss Re today reports an increase in the sale of new term assurance, critical illness and whole life insurance in the UK life market. The figures suggest that consumers are beginning to take more responsibility for their financial planning needs. But the ‘Life Assurance Protection Gap’ has widened further, so Swiss Re is continuing its call to action to the UK life industry as current economic conditions place more responsibility on the individual.

In the latest edition of its flagship annual Term & Health Watch report, Swiss Re provides an authoritative snapshot of the level of new individual protection business written in 2009, based on data contributed to Swiss Re by UK life insurance companies. Despite an increase in sales of term assurance, critical illness and whole life policies, the fall in new sales of income protection is disappointing. Swiss Re will strengthen its existing calls on the industry to increase income protection sales, such as the call to reduce complexity in the design of the product.

UK individual protection market – key facts, figures and trends

  • New whole life business continued its seemingly inexorable rise, showing an increase of 12.6% (totalling 318,078 policies, compared to 282,438 in 2008)
  • New term assurance sales totalled 1,507,685 policies, up 4.1% (compared with 1,447,895 in 2008)
  • Critical illness sales increased by 3.8% to 530,214 (compared with 511,045 in 2008)
  • Income protection sales fell 7.5% to 117,288 (compared with 126,815 in 2008)

Ron Wheatcroft, co-author of Term & Health Watch 2010, says:
“The environment for the sale of protection products in 2009 continued to be difficult, especially for those in the mortgage sector. Despite some evidence of market recovery, mortgage lending in 2009 is down 43% compared with 2008, and is at the lowest annual level since 2000.

“Against this background, it is good news that new term assurance sales, both with and without critical illness cover, have increased. The industry is responding well: new non-mortgage protection sales are up by 8% following a 15.1% increase last year. This suggests that consumers are beginning to take more responsibility for financial planning by buying the basic life cover they need.”

Industry must continue to create awareness for life assurance and income protection gaps

As in previous years, the latest Term & Health Watch provides an update of the “Protection Gaps”, which have been calculated by Swiss Re since 2002. The gaps describe the difference in the amount of cover people hold and the level they should ideally have in place to cover their protection needs.

For the first time since 2004, there is an increase in the amount of the Life Assurance Protection Gap which, measured in sums assured, has grown from GBP 2.3 trillion (GBP 2,300 billion) to GBP 2.4 trillion. Swiss Re attributes this change to a decline in the number of in-force policies.

The Income Protection Gap remains at GBP 190 billion annual benefit – the same as 2009 but much higher than the GBP 130 million level when the gap was first identified by Swiss Re in 2002. Back then, income protection sales were more than double today’s levels.

Ron Wheatcroft concludes: “There are some encouraging signs that the industry is making progress through sales of more innovative income protection products, such as those which incorporate redundancy or unemployment cover or through shorter deferred periods. But the growth is modest when compared against the overall net decline in sales.. As people find it increasingly harder to claim state benefits, the government can play a key role here too by setting out clearly to consumers that they need to take positive action to protect themselves against the risks they run.”

Notes to editors

Copies of the report

Term & Health Watch 2010 is distributed to UK product providers who submit their data to Swiss Re and is offered to journalists and other parties on request. It is not published on Swiss Re’s internet site.

Swiss Re

Swiss Re is a leading and highly diversified global reinsurer. The company operates through offices in more than 20 countries. Founded in Zurich, Switzerland, in 1863, Swiss Re offers financial services products that enable risk-taking essential to enterprise and progress. The company’s traditional reinsurance products and related services for property and casualty, as well as the life and health business are complemented by insurance-based corporate finance solutions and supplementary services for comprehensive risk management. Swiss Re is rated “A+“ by Standard & Poor’s, “A1” by Moody’s and “A” by A.M. Best.