Insurer payouts at £77m a day but protection scarce
Insurers have been paying out the equivalent of £77m a day, according to the yearly statistical publication Key Facts 2015 from the ABI.
The 32-page document stated that this marks an increase of £1m a day compared with the previous year, but there is still a huge protection gap to fill.
ABI director general Huw Evans admitted “there is some work to be done to build confidence in products, tackle under-insurance and help more people understand the value of protecting themselves”.
An example of this is the fact that only 24 per cent of UK households have life insurance, according to the statistics. However, insurers paid out £9m a day from protection products such as life cover, critical illness and income protection policies.
Elsewhere, the statistics showed there were 20.8m individual pension policies in force. Also, confirming the impact of pensions freedoms since April, £2.5bn was paid out from pension pots in the first three months since the reforms were implemented. More than £2.3bn was used to buy regular income products such as annuities or income drawdown products.
The balance between annuities and drawdown has altered. In the three months since the reforms were implemented 18,200 annuities were purchased, a 61 per cent decrease from the second quarter 2014, when 46,700 were purchased. But the average amount used to purchase an annuity in Q2 2015 was £54,500, a 42 per cent increase on Q2 2014’s figure of £38,400.
The number of drawdown products purchased almost doubled in a year, with 9,500 for Q2 2014 and 18,800 for Q2 2015. £1.3bn has been invested in income drawdown products in Q2 2015, compared with £767m sold in Q2 2014, a 70 per cent increase.
The document also detailed how customers buy insurance, revealing that they are more likely to purchase general insurance products themselves than long-term savings products, which tend to be taken with advice.
The statistics showed that 75 per cent of consumers had some form of advice to buy a pension, protection or some other long-term insurance product.
Adviser view:
Ian Howell, of Norwich-based IFA Nurture Financial Planning agreed that more needs to be done to help get the message across to clients about the need for protection, including greater clarity in key document literature.
However, he added: “I suppose as a profession advisers are far too carried away with long-term savings products like pensions and Isas. Protection is not so fashionable in comparison – despite the fact that it is a real need.”
