Situation critical

Last year was a bumper one with regard to the distribution of a number of protection products in the UK – bolstered by the increasing efficacy of direct-to-consumer (D2C) propositions.

Data from the latest instalment of Swiss Re’s annual report on the protection sector, entitled Term and Health Watch 2016, shows that the number of new income protection (IP) policies sold has soared by 10.7 per cent over the past year to 107,302.

According to the study, the upward trend is also applicable to the amount of sales of whole of life products, which grew 7.3 per cent to 294,074. The majority of these sales are ‘guaranteed acceptance’ policies, where no financial advice is given as part of the buying process,

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In contrast, 2015 saw a 7.6 per cent fall in new critical illness sales to 430,127 – mainly driven by a fall in cover written as a rider to a term assurance policy.

Maxine Udall, marketing and research manager at Swiss Re, and author of the report, said: “It’s great to see new sales of pure-term life, income protection and whole of life cover increasing. The fall in new critical illness policy sales is mainly a result of lower mortgage-related product sales.”

Term Assurance

One of the more notable findings of the 28-page dossier relates to new D2C term-assurance sales, including policies with critical illness riders – which soared by 216 per cent to 115,633 last year, up from 36,586 in 2014.

The impressive increase in the ‘direct’ distribution channel is somewhat attributable to its redefinition in this year’s report from ‘other’ which was used in previous reports. As a result, some providers have changed the way they classify sales for the report – accounting for approximately 25,000 of ‘direct sales’.

Meanwhile, directly-authorised term, where regulatory responsibility for product advice and sales lies with the distributor – which includes IFAs, limited panels and firms that are directly-authorised and which arrange products on a non-advised basis – still makes up the lion’s share of distribution in this category, despite a fall in the number of sales by 2.4 per cent to 868,629.

Ben Sear, managing partner at Greater Manchester-based Martin-Redman Partners said: “Companies such as Tesco and Asda now sell life insurance. These brands are household names, so many people would trust the services they offer. Applications can be completed in a short period of time online and involve little paperwork. My concern is that many people are taking out a policy without actually understanding what it covers.”

He added: “There will always be clients who will appreciate the value of financial advice whether it is face-to-face or robo-advice. I do not think IFAs have been brilliant at selling protection. I think we focus more on investments, which is generally considered a more interesting area.”

Tied sales have also increased from 117,169 in 2014 to 149,244, while bank sales have experienced a reverse of fortunes, falling 48 per cent to 122,250.

Mr Sear said: “There is a huge lack of trust in banks. They are blamed for the financial mess that the country is in. Clients are aware of high-profile scandals, such as the payment protection insurance mis-selling scandal, and it is going to take a long time for consumers’ faith in banks to be restored.”