New figures released by the Association of British Insurers (ABI) have painted a thoroughly confusing picture of the health of the protection market.
The latest Life and Pensions New Business data reveals that, while overall the individual protection market remains stagnant, almost all individual products have performed worse than they had at the same point last year.
New regular premiums for individual protection for the second quarter of 2005 amounted to £264m, well up on the £250m recorded over the same period last year. However due to the disappointing performance of the first quarter, the six month results are only fractionally better than the first half of 2004.
The picture becomes even more perplexing when protection products are analysed individually. Term assurance income has plummeted from £192m in Q2 2004 to £155m in Q2 2005 while new whole of life premiums dropped from £21m last year to £19m this quarter.
Similarly, critical illness (CI) rider benefit volumes are down to £63m this quarter from £86m in the second quarter of 2004 and the already beleaguered income protection market recorded further new premium sales falls; down to £13m in Q2 2005 from £16m over the same period a year ago. The only product to actually improve on 2004 was standalone CI which edged up in the second quarter with new regular premiums of £8.5m, up from £8m last year.
Things appear somewhat healthier in the group protection arena although Q2 2005 saw recorded new regular premium income of £123m, slightly down on the £128m posted last year. This fall has been offset however by the strong performance in the first quarter and the longer term upward trend in the group protection market.
"It is good news for the insurance industry but action is needed from the Government and the Financial Services Authority if these products are to achieve the role originally envisaged for them," said Chris Kenny, director of life and pensions at the ABI.
Despite the confusing sales picture, advisers attention has been caught by shifts in distribution channels and the indications that, in individual protection at least, IFAs are losing market share.
"What is noticeable is the percentage increase this year in non-intermediary sales. It seems that providers are having great success with direct invitation marketing or through their salesforces," said Alan Lakey, partner at Highclere Financial Services.
Independent advisers business is down from 36%-38%, to 32% in the first two quarters of 2005 as some advisers may be becoming tied or multi-tied."
