Income protection grew by 22.6% last year, Term & Health Watch finds
Swiss Re has reported that individual protection sales increased 5.9% during 2018.
The latest Term & Health Watch found that 2,088,214 new term, whole life, critical illness (CI) and income protection policies were bought during 2018 - the highest level of new business since 2004.
Term sales overall grew by 5.5% during 2018, while term sales without critical illness (CI) increased by 7.3% and term sales including CI rose 1.7%.
All products lines are up this year with the exception of standalone CI which is down by 1.4%, however acceleration of life cover accounted for 90.8% of new CI sales.
Income protection (IP) sales have risen for the fifth year in a row, policies grew by 22.6% with 58% of these policies written with benefits paid to a selected retirement age, the report found.
Fully underwritten whole life policies increased by 8% and guaranteed acceptance whole life polices rose 2%.
It is understood that an increase in mortgage sales during a buoyant year for first time buyers (highest since 2006) is helping to drive protection sales, while residential lending is up by 3.5% on last year. Remortgaging is at its highest level for a decade (one in five mortgages) and consumers are benefiting from competitive rates.
Sums assured have reduced, Swiss Re found, suggesting that people are remortgaging for lower amounts.
Brexit uncertainty is also said to be leading to more conversations about protection around mortgages, according to Swiss Re, while consumer confidence in protection is said to be improving.
According to the report's author, Maxine Udall, marketing and research manager for Swiss Re, the individual protection has "performed well" despite "ongoing political certainty and consumer caution".
"The directly-authorised sales channel has continued to do well," she said. "With the number of first time buyers and remortgages up in 2018, there were good opportunities to discuss protection needs."
IP makes up 40% of multi-benefits written through iPipeline, the report found, indicating that technology is making it easier for advisers offering the product.
"There is always much more to be done and continuing industry engagement with government is essential to create the environment in which those who make provision, for example to meet their rental costs or to top up their workplace benefits, are always better off than those who don't," said Udall. "But it's not just a product issue. If we are to continue to grow the market, more of the collaboration seen in 2018 is needed - and a few more good news stories along the way will help too."
The report found that market sentiment is positive around collaborative industry initiatives such as Building Resilient Households, the DWP Access to Insurance Working Group and the publishing of paid claim stats by ABI and GRiD, while Insurance Distribution Directive (IDD) requirements are helping to drive standards among advisers and encouraging referrals to protection specialists.
While life insurance is normally taken out by both parties when buying a mortgage, the report found that this was not the case for income protection during 2018. Only 38% of new IP sales were made to women, compared to 62% for men.
Chloe Gilbert, clients project manager, Swiss Re and co-author of the report, said: "While there are more women buying income protection cover than in the past, the data and equivalent data for employer-sponsored policies show that women are still under-represented in terms of coverage.
"There is scope to do much more," she added. "Some people may prefer talking to a woman, yet the majority of advisers are male. More female advisers may be one of the keys to unlock the potential here."
According to the report, the reason for the small increase of level term policies with and without CI (1.4%) may in part be linked to the levels of business uncertainty reported in Group Watch 2019.
Despite strong supporting material being offered by providers, this section of the market has not met its potential meaning that many smaller businesses remain vulnerable to the loss of key personnel, said Swiss Re.
"There is huge gap in the market," added Udall, highlighting there is an opportunity to better communicate the need for business protection during economic uncertainty.
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