The UK protection market has good reason to end the year with a degree of optimism.
While overall sales numbers seem fairly flat (with suggestions of a fall in critical illness sales), income protection sales are up significantly and there is lots happening in the market right now in terms of product development and new technology.
Something, it seems, will have to give in the not too distant future, that could see genuine technology change and market disruption.
All of which should be welcomed, as long as it leads to more families being better protected.
Along with my round-up on what made 2015 in protection interesting, we’ve also spoken to some of the most prominent advisers in the market about their highlights, and what will drive the market forward in 2016.
Auto-enrolment has dominated 2015 for many advisers, but it has also had a significant impact on protection.
AE has been a positive driver for protection with business clients, especially useful for those advisers who might be finding it difficult to adapt in a post-RDR market.
Roy McLoughlin, of Master Adviser, has found auto-enrolment a major force in facilitating protection discussions. He says: “For many small businesses auto enrolment is their first interaction with buying a financial product, therefore the natural lineage is to ‘what’s the next one?’ And that leads to protection.”
Zane Groves, of financial planning firm LightBlue, says he feels there has been a real push from insurers to help advisers facilitate business protection in the last year: “The business valuation and risk calculators launched really allow you to work together with the client, ensuring the right cover, term and sum assured are written.”
Mortgage Market Review
The Mortgage Market Review has been in force since spring 2014 and the effects can now be felt in the wider industries.
While standards of advice overall are seen to have been raised in the mortgage market, the MMR has a more a negative perception in the protection world.
Rightly so, a client’s expenditure is tightly scrutinised ahead of any loan being approved, but this can also include regular outgoings such as insurance policies and pensions, which count against how much can be borrowed.
If budgets are tight, this could prove to be a disincentive to protecting your finances or saving for retirement.
Long-term care funding
We have seen a new direction in protection products this year, from insurers such as VitalityLife and AIG, who have taken a new stance on the whole of life cover concept to enable people to pay for long-term care.
It is early days, but if deemed a success it might be the way the industry approaches the funding of long-term care going forward.
These developments aren’t traditional long-term care insurance products and could even focus on the younger end of the market, which is refreshing, as speaking generally people shouldn’t wait until they are retired before doing something about their needs.