Sales related to PPI implosion
Sales of income protection (IP) have improved for the first time in five years, according to Swiss Re's Term & Health Watch 2009.
According to the report, total new individual sales for the product grew from 111,780 to 126,815 between 2007 and 2008, an increase of 13.5%. In previous years, the product has seen steadily declining sales: 162,061 sales in 2004, 147,285 in 2005 and 130,365 in 2006.
However, the report warned: "Despite the year's modest increase in sales, IP is a particular challenge. Product providers and distributors expect the group IP market to contract in 2009 and 2010, with increasing numbers of employers revising existing IP benefits downwards by limiting the maximum payment term to five years or fewer. For scheme members, this will create a growing gap between the point where benefits cease and the expected date of retiring from work - a gap which will need to be supplemented by individual IP sales."
Clive Waller, senior partner at CWC Research, said that the increase in IP sales was directly related to the implosion of the PPI market: "A big factor in the increase is HSBC and they deserve a lot of credit because they were the first to pull out of the PPI market. It has worked for them so it showed there's a life after PPI."
Overall, Term & Health Watch 2009 gave a mixed message about the protection industry as despite the increase in IP sales and with whole life business at its highest level since 2000, new term assurance and critical illness (CI) sales slid by 6.1% and 4.7%.
Ron Wheatcroft, co-author of the report, said: "The good news is that non-mortgage-related sales rose by 17.5%. We attribute this partly to a lack of confidence in savings and investment products, and partly because consumers are concentrating on essentials in the wake of rising unemployment. This is a good signal that protection is seen as core. The challenge is to sustain and surpass these levels when confidence in savings returns."
The report added that it believed that an industry-predicted diminishing group market could lead to an uptake in individual policies as the latter filled the space left by the former.
It was also revealed in the survey that the number of IFAs writing income protection, and the proportion that that channel made up of the total, had suffered a marked decrease, falling by 5.1% between 2007 and 2008. In comparison, the amount of IP written by tied advisers rocketed by 36.5%.
