Regulatory process slammed as 'off-putting for customers and advisers'
Sales of all UK protection products have fallen over the past year, according to the latest Swiss Re report.
The reinsurer's Term & Health Watch 2006 revealed that income protection (IP), term assurance and critical illness (CI) sales dropped in 2005.
Individual IP in particular experienced a difficult year with the market falling by over 9%, from 162,061 in 2004 to 147,285.
Deepak Jobanputra, strategic development actuary at Swiss Re and one of the authors of the report, admitted the IP gap was growing.
He said: "This is partly due to the focus on pensions and savings supported by the Government and trade bodies.
"But for large segments of the population, protection is more important than savings.
"There is also a general lack of awareness about other types of insurance beyond the mortgage market such as family protection and inheritance tax cover."
Swiss Re argued that there is a need for a fundamental review of IP to ensure it does not disappear from the market.
Peter Le Beau, managing director of Le Beau Visage, said he was not surprised by the poor result.
He said: "It was fairly apparent that sales were decreasing.
"Although there is not just one reason behind this fall in sales, one leading cause is that the regulatory process is just so long and tedious.
"The regulatory application process is off-putting and discourages sales. Intermediaries as well as customers think this.
"Currently the industry is overwhelmed by the regulatory process."
Le Beau said he also believed the IP gap was increasing partly because IFAs are not very good at selling or explaining the value of IP.
He added: "The industry needs to develop a generic product for the public and intermediaries."
The Swiss Re report also revealed that sales of individual term assurance fell from 1,767,208 in 2004 to 1,584,208 in 2005. Individual CI sales also fell - from 736,671 in 2004 to 632,285 in 2005.
According to the Association of British Insurers' UK private medical insurance (PMI) statistics, individual PMI decreased from 1,052,000 in 2004 to 1,012,000 in 2005.
Corporate PMI increased from 2,614,000 in 2004 to 2,665,000 in 2005.
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