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Protection providers have looked at a number of ways to raise the profile of the industry in the last year. There have been several innovations in product development and periphery systems, particularly tele-underwiting, as protection providers seek to make protection more accessible to advisers and customers alike.

The Association of British Insurers' Treating Customers Fairly committee also developed new guidance on paying claims where the customer had not disclosed important lifestyle or medical information.

The guidelines came into force in January this year and made it more clear when providers should pay claims in full or part and when claims should be declined.

We have also seen product developments that have ranged from the more holistic, technically advanced products like PruProtect, where healthy behaviour is rewarded, and the more specific, simplified direct products such as Virgin Money's Cancer Care.

The FSA's interim paper on the Retail Distribution Review suggested a non-advised "guided sales" process, through direct products, would encourage more consumers to take out protection.

However many intermediaries think seeking advice on health cover is as imperative as ever.

There is still, according to Swiss Re, a £2.3 trillion protection gap that needs to be addressed and rather than rest on recent innovations insurers are already gearing up for the insurance products and sales processes of the future.

What does the future hold for the protection market? Will products become more complex like PruProtect or will we see simpler deals with more innovation in both the application and claims process to further reduce issues of non-disclosure?

Chris McFarlane, head of protection for LV=, said future developments were most likely to be evident in the application process as providers looked to eradicate the complexity of paper-based applications.

Mr McFarlane said this would improve the turnaround time for getting clients on risk

He said: "Speed of acceptance and completion will become increasingly important so we see further growth in e-applications and tele-interviewing, coupled with new techniques for gathering customer information."

Peter Hamilton, protection management director for Zurich Life, said he also felt this was the way the market was likely to develop.

He said: "We are likely to see a move towards greater simplicity, both in terms of the product and the process, an increasing focus on different forms of medical evidence and a move away from the current heavy dependence on GP's reports."

Axa is one provider that has already made progress in this area.

In November 2007 Axa abolished automatic GP report limits for consumers aged less than 45 applying for life or critical illness products.

The changes were made in response to feedback from financial advisers regarding the lengthy delays caused by obtaining GP reports and Axa felt this would speed up application times for consumers.

In November the provider also began a six-month pilot in conjunction with specialist testing company Gemini Biomedical.

Clients who required medical screening could have it done in designated pharmacies that Axa believed would reduce turnaround times from 30 days to 10.

Stuart Lawson, protection marketing manager for Axa, said he thinks other insurers will follow his company's lead.

He said: "A key barrier to growing the market is access and ease of purchasing protection for both consumers and their advisers.

"It is in these areas of service and accessibility that we are likely to see innovation and development in the future. We expect developments of product features in the protection insurance market to be around elements of differentiation in niche areas rather than major change."

Mr Lawson also thought regulatory pressure from the FSA under TCF was likely to encourage providers to simplify products.

He said: "Under TCF advisers will also need to ensure consumers understand the products they are being recommended. This is also likely to limit the market opportunity for more complex lifestyle products."

Zurich Life's Mr Hamilton said he was not convinced advisers would see major changes in products as client needs had not changed dramatically and sometimes providers could fall into the trap of changing for changes sake.

He said: "Clients and their families still need protection against the potentially devastating financial impacts of death, long-term sickness or disability.

"Too often, in the search for something new, we lose sight of the massive positive difference we are already making to hundreds of thousands of lives through the payment of many millions of pounds in claims. That said, there is always room to improve what we have, to minimise the gaps and overlaps in cover."

This is a view that is shared by Legal & General.

Joe Wiggins, protection PR manager for Legal & General, said: "The core protection products in the industry have not changed for years and there is no reason to expect they will change significantly in the near future.

"We anticipate some development will come in the propositions area where providers are getting more sophisticated at identifying new customer needs. This is already being demonstrated in the growing business protection market."

Roger Edwards, product director for Bright Grey, said while there had been several innovations in the application process, such as online submission and tele-underwriting, major product innovation had been sadly lacking.

He said: "It is more than 20 years ago since the last genuinely brand new product, critical illness cover, was launched in 1986.

"Since then there has been innovation but this has been more evolutionary than revolutionary. There is always considerable debate in the protection industry about the need to innovate; that we should be looking at an impact based life changing effects of illness alternative to supersede critical illness cover or a new and simpler version of income protection without all the many issues that prevent the runaway success of the incumbent model. But it has proved quite difficult to be revolutionary in this market.

"With so much regulation and the added fear instilled by our litigious society, advisers hesitate to recommend completely new product ideas when it is safer to stick with what they know and protection providers hesitate researching and developing anything revolutionary because they know it will be a long and expensive game to see a return on their investments."

However this was not a view Sammy Rubin, chief executive of PruProtect, agreed with.

When Prudential launched PruProtect last year the insurer claimed the product would revolutionise the protection industry.

The product includes life cover, income protection and severity-based serious illness cover but also included a points system designed to encourage people to take control of their own health and wellbeing.

Mr Rubin said the product would help mould the protection products of the future.

He said: "As insurers look for new ways to differentiate their products it is inevitable that we will see greater innovation.

"There is empirical evidence that a person's lifestyle has a significant impact on their future health and general wellbeing. As other insurers recognise this fact they will follow PruProtect's lead in encouraging policyholders to enjoy a healthier lifestyle."

LV='s Mr McFarlane agreed with Mr Rubin that products linked to lifestyle will drive innovation.

He said: "We can see individual products evolving in a number of potentially different ways. However we believe that menu products offering a choice of covers which can be tailored to individual customer needs and change over time to reflect customers changing financial needs or lifestyle circumstances needs will become increasingly important.

"We also believe products will increasingly involve additional, complementary services. At LV= we have enhanced our products through launching our added-value propositions of Healthy Steps, an online service that aims to help policyholders find the best route for them to improve their health or reduce their risk of certain health issues and Extra Care (provided by Red Arc), both of which move critical illness cover and protection, beyond just another financial services product."

However other providers are not so sure we will see further variations on this type of product.

Axa's Mr Lawson said this type of product was likely to remain a niche market with one or two players simply because of the complexity of such products.

He said: "Consumers and advisers can already struggle to understand product offerings such as critical illness cover so if anything we are more likely to see new product development aimed at making it simpler for people to understand protection products rather than more complex."

While Bright Grey's Mr Edwards thought the PruProtect offering was innovative, he agreed with Mr Lawson and felt advisers and consumers struggled with the complexity of the product.

He said: "PruProtect's product with its link to fitness is a great idea but the underlying severity-based critical illness product is very complicated.

"They have recently increased the commission they pay on the product in order to attract advisers to sell more, which tends to support the notion very different protection products take a long time to become established."

Legal & General's Mr Wiggins said he was not convinced overly complicated products were the way forward either.

He thought customers were more inclined to be attracted to a product that had a basic concept and was therefore easier to grasp.

He said: "People just want a simple product they can understand is going to deliver when they need it most.

"Advisers need to consider the premium, the speed with which the provider can process the business, the expertise of the underwriting team and the reputation for paying claims. Considering that more than 85 per cent of claims are for just five conditions: cancer, terminal illness, heart attack, multiple sclerosis and stroke, we do not believe endless product variations are necessary just for the sake of being innovative but of course we want to ensure the product remains relevant and attractive to customers."

As the last 12 months has shown, protection providers and the ABI have been working hard to reduce the number of claims that are declined, particularly for non-disclosure.

This is something insurers are keen to continue and it appears this is where all are agreed the future of the protection market is headed.

Zurich's Mr Hamilton said: "Over time I would expect to see a greater proportion of claims being paid. There are a number of very positive initiatives driving this.

"The ABI changes on definitions will help, both in terms of the attempt to provide greater clarity for consumers, and the element of future-proofing. The more recent changes on the categorisation of non-disclosure is another positive step.

"In essence only the very serious non-disclosures will result in a non-payment of a claim and a rescinding of the policy. We will see more proportionate claims being made and the industry's decline rate dropping."

However Mr Hamilton said it was still important to highlight cases where claims had not been paid.

He said: "Greater awareness should ultimately lead to greater consumer understanding and confidence. We will obviously constantly search for ways to minimise declined claims and to build consumer confidence."

Axa's Mr Lawson said the ABI guidelines were a step forward in TCF but said we would still expect to see some declined claims or claims paid only in part.

He said: "We can expect to see more development in this area as more providers differentiate themselves in the market by the way they pay claims. For example, this might be a guarantee to pay claims despite non-disclosure after a set period, such as two years.

"Providers will increasingly be adopting smart application methods such as tele-underwriting to minimise claims being declined."

Mr Lawson said the reason customers paid money to the protection industry was because they wanted a full payment in their time of need.

He said: "It is the protection industry's responsibility to do all it can to ensure this happens. However, it is possible the more aggressive players who are trying to lead the market on price might be the least progressive in trying to pay claims.

"In addition, those who stop accepting new business and go into a closed book position might be less progressive on claims, which is why looking at capital strength is important when choosing a provide."

PruProtect's Mr Rubin said he felt the payment of claims was another area where he felt the PruProtcet product was ahead of he industry curve and if more organisations adopted its model, more claims would get paid in the future.

He said: "One of the shortcomings of traditional critical illness policies is the definitions set an all or nothing hurdle.

"As a result, a person whose condition is not quite serious enough to meet the requirements of the definition will receive nothing even though the severity of the condition has had a dramatic impact on their life.

"PruProtect's policy uses a severity-based set of 154 definitions, which pay a sum directly proportionate to the severity of the illness. As a consequence it is more likely to pay out and claims are less likely to be declined as conditions do not have to fit into the traditionally rigid framework."

However he said non-disclosure was an issue the industry was tackling head on.

He said: "The recent ABI guidelines will mean the industry deals with this issue in a consistent and fair manner. There have been a number of new initiatives that have also sought to improve the quality of disclosure and reduce the risk of future problems at time of claim."

So what do advisers think about the future of protection and what would they like to see providers doing more of?

Peter Chadborn, protection adviser for Colchester-based IFA CBK, said he would like to see more adaptable products that change with a client's circumstances.

He said he would like to see products designed so a client can take out a policy and it could evolve with them and there is no need to replace policies.

Mr Chadbourn said perhaps the industry could look at how wraps and platforms had changed the way in which investment business was done.

He said: "Once you have got the framework there, some tweaking and some adjustments can be made in accordance with changing circumstances in accordance with requirements."

Mr Chadborn said he welcomed any product innovation as anything new that was brought to the market should be welcomed. An example of this, he said, was the Animal Friends Insurance that gives premium discounts to vegetarians.

He said: "Good for them. There will not be huge demand for it but companies that are prepared to offer something different have got to be welcomed.

"If someone says we have introduced a product for vegetarians I can not see myself using it but it is nice to know it is there when you come across someone that does want that type of cover."

However Mr Chadborn thought there was a fine line between a niche product and a gimmick.

He said: "Take an organisation like Pioneer. All they do is income protection but what they do they do very well and they have found a niche not only in this but because they are being able to offer things like Own Occupation to builders.

"No one else is doing it and they have had great success with it so it those kind of companies I am more interested in because it is ticking all the boxes in terms of the quality of the product and the flexibility but at the same time doing something the competition is not doing."

Mr Chadborn agreed the future of protection would be in the simplification of the application process.

He said tele-underwriting and other process that would reduce instances of non-disclosure was something he wanted to see a lot more of.

He said: "It is a no-brainer as far as I am concerned. The problems around non-disclosure are not down to consumers not putting down the correct information. A lot of it is down to the sales process.

"So if advisers apply a bit of common sense and separate the advice and the application process, and tele-underwriting obviously fits that bill perfectly because you are giving the responsibility to someone else and it is done properly and in a timely manner, of course we are going to get improved disclosure."