IP sales fall 7% as protection business slips slightly

The protection market is shrinking and becoming more concentrated in the hands of a few providers, according to figures from the FSA.

Sales of pure protection products dipped by 1% in 2010/11 compared to the previous year.

The FSA confirmed to COVER that this was predominantly fueled by a 7.7% dip in income protection (IP) sales and a 25.6% fall in stand alone critical illness (CI).

However, CI when sold as a rider benefit grew by 2.8%.

The regulator noted that the decline in mortgage sales has hit both sellers and providers in the market and also identified the trend towards a higher market concentration.

In all three protection markets the five largest provider firms combined for more than 60% of the business share.

This concentration is highest in the standalone CI sector which is also the smallest in terms of sales and providers.

Banks and Building Societies gained substantial market share as providers, to the detriment of insurance companies, the FSA continued.

Last year 89% of pure protection contracts were sold through non-provider firms acting as intermediaries, an increase from 86% in 2009/10.

This rise was mostly driven by income protection products.