UK Protection Insurance: Critical Illness & Income Protection

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Individual product performance in the protection market is a turbulent and confusing picture, with erratic premium behavior across the board. While term (and specifically non-mortgage term) products are still the dominant force with over 70% of protection share, there has been downward pressure on every product line in recent times, reflecting the uncertain, fragile national macroeconomic picture. Indeed, in the absence of major market-driven change it is the macro-environment that dictates performance.


Verdict Financial’s “UK Protection Insurance: Critical Illness & Income Protection” examines the protection market, focusing on two products: critical illness and income protection. It examines how the market has performed and explores the key drivers shaping the market going forward. It also highlights the impact of RDR and provides a forecast for the next five years.

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– Review your strategy against both existing and new challenges regarding the critical illness and income protection markets.

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Table of Contents




Protection has reached a new normal and needs to be reinvigorated

Key findings

Critical success factors



The protection market has seen major changes

Protection is sold not bought, making advisors gatekeepers to the market

Contract levels have reduced due to the RDR

Banks have retrenched to core business and reduced their advisory capabilities

Protection products are exhibiting varying performance levels

IP and CII account for a mere 7.2% of the total protection market

Prices rises have sustained the market

The IP sector has struggled to recover its 2012 market position

The product offers significant benefits, but awareness and engagement is low

Confusion exists about the types of cover

The application process is long

Little is done to spread the word on policy benefits

CII penetration is very low, and has been declining

Issues affecting IP also impact CII take-up

The impact of ill health is well publicized

CII is more likely to be added to another protection product

The product has received negative press regarding claims

Like IP, the CII sales process is long

With-rider products significantly expand the CII market

Half of mortgage-related term assurance has CII added

The group life market can detract from individual protection

Pressure from new regulation is currently minimal

The protection market is out of the spotlight for now

All quiet on the regulation front

RDR has effectively excluded less-affluent consumers from the market

Subtle social change is taking place, while a lack of proactive customer engagement means the market is stalled

Industry disruption has been catching its breath

Insurers are focused on operational pressures


RDR has changed the distribution landscape for protection products

The total protection market picture reveals the collapse of restricted advice

However, the premiums story shows the value of advice

Frustrations are creeping in among advisors

IP is still a product that needs advisors

The restricted advice channel has shrunk

The independent channel provides more value per contract

The independent advice channel has shrunk back from CII

The restricted advice channel has held firm

Pure direct channels are gaining ground

More changes are afoot in the advice market

Is it an advice gap or a guidance gap?


The national climate of uncertainty will hold the protection market back

It will be a long road back for customers shut out by RDR

Post-Brexit Britain's future is unknown

The domestic political picture is also in turmoil and could change everything

The IP market is set to grow by £10m in five years

Sales growth will be driven by price inflation and a healthy housing market

Sales will be inhibited by Brexit and industry inertia

The whole of life market forecast predicts growth at the expense of term

The CII market will add 31% to new premium value by 2020

Sales growth will be driven by premium increases and product innovation

Sales will be inhibited by Brexit

IP and CII on the verge of an existential crisis

Both the IP and CII markets are in something of a rut

Yet so much could be done to boost growth

What is the meaning, the purpose, the value of this industry?

Firms must realize the customer game has changed

Time to move on from life-stage journeys and consider the end-to-end customer experience

Insurers have work to do to deliver on hygiene factors

An inability to step away from complexity creates the right conditions for disruption

The distribution challenge centers on digital

A top-down and bottom-up approach are both needed to solve the digital distribution dilemma

Automated advice offers opportunities to all stakeholders, but fair costs will be key in closing the advice gap

Slow progress on the digital agenda will continue to hold back operations and processes


Abbreviations and acronyms


About Verdict Financial



Table 1: Total protection market size by number of contracts and new business premiums, 2011-15

Table 2: The role of IP and standalone CII within the total protection market, split by number of contracts and new business premiums, 2011-15

Table 3: IP market size by number of contracts and new business premiums, 2011-15

Table 4: Standalone CII market size by number of contracts and new business premiums, 2011-15

Table 5: CII cover as a bolt-on to other protection products, 2015

Table 6: Group life, CII, and IP business by number of contracts and new premium business, 2011-15

Table 7: Total protection market, split by distribution channel, 2013-15

Table 8: Distribution of IP contracts, split by channel, 2013-15

Table 9: Distribution of IP new business premiums, split by channel, 2013-15

Table 10: Distribution of CII (standalone) contracts, split by channel, 2013-15

Table 11: Distribution of CII (standalone) new business premiums, split by channel, 2013-15

Table 12: Forecast of IP premium income, 2015-20

Table 13: Forecast of CII (standalone) premium income, 2015-20

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