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The Actuary The magazine of the Institute & Faculty of Actuaries

Protection trends

Swiss Re Life & Health Limited last month published its latest Term & Health Watch, the annual benchmark analysis of new life and health insurance sales to UK consumers. Highlights included:

  • Sales of term assurance policies in 2003 increased by more than 4% over the previous year, with over 2.1m policies sold. This number of sales is a record for the industry and, year on year, represents the ninth successive rise in sales.
  • Individual critical illness (CI) and income protection (IP) sales, however, experienced a decrease since the previous year, although sales of mortgage-related CI showed a modest 2.9% improvement over 2002.
  • The average sum assured, across all distribution channels, for a new individual term assurance policy in 2003 was £93,299 (2002: £87,437). Sales by independent financial advisers (IFAs) account for the highest average sum assured. The average premium, across all channels, was £370 (2002: £349).
  • New mortgage-related term sales in 2003 increased by more than 5%, compared with the year-on-year increase in new mortgage loans of only 3%. It is possible that these results reflect a degree of rebroking of policies alongside a remortgage – especially given the 50% rise in remortgaging in 2003 – rather than a pure increase in penetration for new customers.
  • A number of factors point to the decline in new sales of CI cover, which fell some way short of the remarkable 33.9% growth that occurred between 2001 and 2002. Term & Health Watch signals a number of reasons for the fall, including concerns over earlier-than-expected diagnoses of critical illnesses – made possible through medical advances – which has contributed to a reduced appetite for long-term guarantees. This has resulted in significant price increases for consumers and market uncertainty for intermediaries.
  • Annual increases in individual IP sales since 2000 were not sustained in 2003. The 11.8% decrease in new sales can be attributed, according to the survey, to a lack of consumer awareness about the need for IP cover and to the preference, amongst intermediaries, to concentrate on CI to protect the mortgage.