By Ben Marquand A buoyant mortgage market and the demise of the endowment have given the term market...
By Ben Marquand
A buoyant mortgage market and the demise of the endowment have given the term market a boost, according to Swiss Re Life & Health.
According to TermWatch, the reassurer's annual survey of the market, there was a 7.3% increase in new sales of term assurance policies to £1.1m last year, compared with a fall in new business in the whole of life market of 7.1%.
The total premium income in the term market increased by 23%.
Term assurance now accounts for 32.8% of the regular premium life market compared with 18.6% in 1994. Sales of decreasing term assurance account for 44% of life fund term sales, which the survey also attributes to the buoyant mortgage market.
Technical manager, Ron Wheatcroft, said: "Much of the growth in sales in pure risk products has come from a very active mortgage market. The mortgage market has been attracting a great deal of attention from the Government as a result of its consultation on regulation and the new CAT standards for mortgage loans.
"The life industry is also going through a review process for endowment mortgage sales and many have withdrawn their endowment mortgage products.
"The outlook for pure risk products in the mortgage market is therefore extremely encouraging and we expect to see new products covering life, disability and unemployment risks being sold alongside mortgage loans in the future."
There was a 12% rise in the total sums assured for all life fund assurance policies in 1999 to £84.3bn, which works out at an average of £76,611 per policy. Sales through IFAs resulted in the highest average sums assured, which is thought to be a reflection of their higher socioeconomic target market.
However, IFAs only made 32% of sales in the individual term market. Direct sales and appointed representatives accounted for the majority of sales with nearly 61%.
According to the survey, the general direction of term rates will maintain a downward trajectory and, as the difference in rates between the top 10 providers becomes smaller, companies will have to look for new ways to attract new customers.
Wheatcroft added that some companies could quit the term market altogether and use other companies' products to complete their range.
