Gloomy outlook for CI

Sales of individual critical illness (CI) policies continued to fall between 2007 and 2008 and will do so until 2011, according to a new report released by Mintel.

The report, based on figures from the Association of British Insurers, shows that sales of the product fell by 14% in this period, from 480,000 sales in 2007 to 412,000 in 2008.

The authors of the report blamed "a sharp slowdown in the housing and mortgage markets," that it says "exacerbated the fall and contributed to an estimated 12% decline in new premiums, from £266m in 2007 to £236m in 2008".

Part of the fall in new premiums, it was noted by the survey, was because of "a lack of affordability and low consumer awareness".

It also said: "The market is expected to recover from 2011, as trading conditions improve. Mintel forecasts that new individual CI sales will increase to 451,000 by 2013, representing a 9% rise on 2008. New CI premiums are expected to increase by 5%, at current prices, to £248m in 2013."

The market analysts predicted the downward trend would continue: "Mintel predicts a continuation of the recent downward trend in new sales volumes in both 2009 and 2010, although there will be a deceleration in the rate of decline."

The continued downturn was blamed on a number of factors including the slump in the housing market and the current economic crisis. However, Mintel added that falling house prices could mean lower, more affordable premiums due to lower sum assureds.

Clive Waller, senior partner at CWC Research, said: "It is very difficult to make these forecasts but I think Mintel are looking mainly at the mortgage market. The more important issue is recommending the right protect covers."

He added: "My belief has always been in income protection (IP). I think the thing that a good adviser would do now is ask whether CI is suitable. Consumers certainly need IP."