Protection has always been the poorer sister of the financial services sector, but it seems at least that efforts by certain financial adviser firms to put it firmly on the agenda has moved sales of these products further up the list for clients.
According to the latest Swiss Re Term & Health Watch 2018, sales of new protection policies – whole of life, critical illness (CI) and income protection (IP) – were up by 11.6 per cent in 2017, on 2016. This equates to a figure of 1.97m, with all CI showing an increase of 21 per cent.
A large part of this is due to financial advisers being more aware of protection policies being an important part of the financial planning agenda, with directly authorised (DA) term sales increasing by 18.3 per cent, while DA CI sales increasing by 13.7 per cent.
Indeed, such is the extent to which some adviser firms see the importance of protection in the financial planning process, that some have actually written it into their compliance procedure. Openwork, for example, has for 18 months insisted as part of their advisers' pattern of work that they have to have a conversation with their client over protection; if he or she decides against it, they have to sign a form saying, 'I do not want to take out a protection policy'.
Openwork is the first firm to be setting up this system with iPipeline, and another network is in the process of doing so.
Ron Wheatcroft, technical manager of Swiss Re, said: "Intermediaries are doing a very good job of getting the message out. It doesn't feel there has been a mass re-broking exercise. It feels intermediaries are looking to build long-term relationships with clients. Protection is part of the conversation with intermediaries – it's part of compliance."
A key part of the adviser package is being able to offer a multi-benefits solution, which is much more available through technology – this means several different policies with different terms, multiple lives with discounts on fees and one application process.
During 2017, according to Swiss Re, the top benefit combinations were as follows:
- Two level life benefits.
- Level life with decreasing life.
- Level life with level CI.
- IP with decreasing CI.
- Two IP benefits with decreasing CI.
The above account for 35 per cent of total multi-benefit policies, with family income remaining a very popular choice as part of a multi-benefit policy. More than half – 54 per cent – of family income policies were written as multi-benefit package followed by decreasing life at 31 per cent and IP at 30 per cent.
The report said: "Utilising the ability to quote multi-benefit, advisers are now able to model different product options and create richer protection plans tailored to consumer needs.
"For example, using multi-benefit plans, two lives can be covered, with IP as a rider, and mixes of benefits spanning different terms.
"In 65 per cent of policies containing both level and decreasing life cover, the different benefits had different terms. A large amount of these multi-benefit policies were mortgage related, with 60 per cent of plans written containing a decreasing life or CI benefit."
One reason multi-benefit policies have become more popular is because of new functionality on the iPipeline platform, allowing them to offer a more tailored package.
In terms of the top five providers in relation to the various product categories, Legal & General and Aviva together sold over 50 per cent of term assurance policies, with and without CI benefits, although by premium value this proportion is less.
The Aviva figures – amounting to 313,000 policies, and 21 per cent of the market, include sales from Friends Provident, which last year were split out, while L&G took 32 per cent of the market in terms of policies sold.
When it comes to IP, Aviva holds the top spot, selling 37,266 policies, or 31 per cent of the market.
The sales figures for other providers in the top five show the efforts some providers are making in terms of innovating with product design and marketing. AIG, for example, has made itself amenable to financial advisers with its product offering, and the company has seen a 48 per cent increase in sales of term assurance policies, to 117,000 last year. Meanwhile The Exeter, which has been heavily pushing IP, has promoted itself as a niche player. Supporting intermediaries has increased its sales by 84 per cent to 9,700.
IP is now broken down in terms of conventional IP and IP with a limited term.
Conventional IP still constitutes 51 per cent of the market, making up 62,000 policies, and growing 5.8 per cent on last year. But short-term IP is growing more rapidly, with one-year payment term growing 87 per cent and five-year term growing by 321 per cent on the previous year to 8,211 policies. The latter was in large part due to Royal London moving into the market for five-year short-term IP.
The report shows that sales of protection products via financial advisers is growing at a healthy pace. Total new individual term sales went past the £1m mark in 2017 when sold by intermediaries, a rise of 18 per cent on last year to 1.6m, while sales of CI products rose 13 per cent via advisers, to 345,000.
There was also a big increase in direct sales of CI policies of 217 per cent to 55,332, due in large part to TV advertising on Sky from Beagle Street.
Mr Wheatcroft said: "I think CI can be sold direct but it needs to be really really clear about what it covers and what it doesn't cover. Beagle Street has changed a few perceptions; it has always been that term can be sold direct, CI less so because it's more complex and IP, very, very rarely. What it's done, it shows that the hierarchy has not exactly shifted from that model but will deliver its message to younger consumers."
Melanie Tringham is features editor of Financial Adviser
