The outlook for protection insurance premiums

Things are not quite the same for health cover but considering we’ve seen three consecutive increases in Insurance Premium Tax coupled with the ongoing impact of medical inflation, this should come as no surprise, more of which later.

Back to life, IP and CI for now. According to rate comparisons provided by independent protection adviser LifeSearch for the purposes of this column, over the last five years, premiums have generally decreased across these different product types and across a range of customer ages. 

Data from Swiss Re’s Term & Health Watch 2017 report shows that across all these same product types, sales decreased between 2012 and 2013 and then showed a steady increase from 2013 to 2016 (the most up to date statistics available from Swiss Re).

While encouraging, Swiss Re cautions against celebrating just yet, stating there is much work to be done yet to ensure that more people get the coverage they need.

Similar analysis from Equifax Touchstone, showed that protection product sales in Q2 2017 rose by 4.9 per cent on the previous quarter, reaching £147.1m, the highest level in five years. 

Customers may sometimes pay a little more but should feel reassured that they will receive protection that provides more than just a cheque. Jennifer Gilchrist

Their data, which is collated from 22 protection providers, with inputs from more than 11,000 advisers, reveals that mortgage term policies grew most during the quarter, up by 20.7 per cent on Q1 to £26.2m. This was followed by critical illness policies which experienced a 15 per cent increase to £4.5m. 

In addition, income protection, decreasing term with critical illness, and relevant life policies all performed positively, with sales increasing by 11.1 per cent, 10 per cent and 8.7 per cent respectively. 

A picture of premium decreases and sales increases is undoubtedly attractive. Whether the two aspects are linked, however, remains open for debate.

According to the experts we spoke to, the increases in sales may have less to do with quoted premiums and more to do with better products, improved customer and adviser engagement, plus the marketing advantages that come with digital enablement. In other words, getting the right products in the right place at the right time to an appropriate audience.

Now you see it…

Premiums might be playing a part, but it seems that what you see is not necessarily what you get.