Term & Health Watch

Total sales of protection products increased by a modest 0.9 per cent in 2015, according to the latest Term & Health Watch from Swiss Re. But while some products fared significantly better than others, with sales in other areas sliding, the protection industry still needs to take action to safeguard its future.

First, though, the good news. Over the course of 2015, 107,302 income protection policies were sold, representing an increase of 10.7 per cent on sales during 2014. This is particularly promising as it builds on a sales increase of 6.7 per cent the previous year.

IP sales boost

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Part of the reason for this uplift in sales must lie with the Seven Families campaign. Led by the Income Protection Task Force and funded equally by 20 insurance industry companies, this replicated the payment and support that seven individuals would have received if they had taken out income protection before they suffered a long-term illness or disability.

Although only around 10 per cent of its 700 press cuttings were in consumer publications and understanding of income protection among the public had increased by 4 per cent at its midpoint, Kevin Carr, a spokesman for Seven Families, says the campaign’s influence on advisers has been key to sales growth.

“Advisers have really engaged with the campaign,” Mr Carr said. “The case studies help to bring the need for income protection to life and it gives them something to discuss with their clients.”

The key role advisers play in income protection sales can also be seen in the figures. In 2015, less than 0.5 per cent of sales were direct, whereas directly authorised firms accounted for almost four out of five of the policies sold.

Another product that has seen strong performance in 2015 is whole-of-life, with sales increasing by 7.3 per cent. This growth was driven by the guaranteed acceptance plans, which are often targeted at the over 50s and account for almost 90 per cent of the market. Sales for these plans rose by 7.4 per cent in 2015.

The fully underwritten non-linked product has also performed well in the whole-of-life market. Commonly used for inheritance tax planning, sales increased by 8.2 per cent in 2015 with the average sum assured just a shade over £100,000.

Critical condition

However, while these products may have bucked the relatively flat trend, the fortunes of others were far from flattering.

Possibly the most concerning were sales of critical illness insurance. Swiss Re’s figures show that sales fell by 7.6 per cent in 2015. This decline was largely down to a drop in sales of cover written as a rider to a term assurance policy. This product alone saw its sales fall by 9.7 per cent.

The poor showing of accelerated critical illness cover also dragged down term assurance sales. While the number of term life-only policies increased by 2.4 per cent, add in the sales of policies that include critical illness cover, and there was a 1.8 per cent decline in total new term assurance business.

Ron Wheatcroft, technical manager at Swiss Re, points to the Mortgage Market Review, as being responsible for these falls.

“This has addressed the short-term affordability piece, but by making the mortgage process longer, protection and the long-term resilience of the mortgage arrangement has been forfeited for many borrowers,” Mr Wheatcroft explained.