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Timely Insight From the UK Protection Market
is a business data sharing service that provides insurance executives with an up-to-date picture of market developments and their share of the market. Gen Re Protection Pulse covers around 97% of the market. Click on the links below to read more on the quarterly results.
As we entered 2023, the direct influence of COVID‑19 on the protection market subsided significantly. However, other factors meant that the market faced a different set of challenges: international conflicts, sustained inflationary pressures, an upward interest rate trajectory and cost of living challenges have all influenced the underlying performance of the protection market over the last 12 months.
Despite this uncertainty, overall protection market premiums grew 2%. The £776 million of total premiums was the second-highest level since Protection Pulse reporting began, just eclipsed by the overall record of £779 million seen in 2019. The number of contracts has fallen slightly, but we have observed a higher average case size.
Our Protection Pulse survey1 shows that the performance across 2023 varied by contract type, as can be seen in Table 1.
The income protection (IP) market has enjoyed another year of strong growth, continuing on from the increases seen across 2021 and 2022. In Q4 2023 £26 million of IP premiums was written, the highest levels recorded since Protection Pulse reporting began. The growth in premiums exceeds the increase in number of contracts written, potentially fuelled by high levels of earnings growth in the employment market, and inflation driving larger indexation increases.
Underwritten and guaranteed acceptance whole of life (WOL) markets have both performed well in 2023, with premiums and contracts written significantly higher than 2022. Indeed, the underwritten WOL market saw the highest levels of premiums written since 2015. The guaranteed acceptance WOL figures have partially recovered from 2022 levels but remained well below pre-COVID‑19 pandemic levels. One of the factors behind the growth for both WOL markets would be the higher yields seen in 2023, which enables providers to price these products more competitively.
Term assurance has had a contrasting year: the premiums written in H1 2023 showed a 5% increase compared with H1 2022 levels, but there was a significant slowdown over the second half of the year, with premiums written down 8%. Overall, there was a reduction of 2%. The fall in the number of contracts written is even more pronounced, with a reduction of 10%. In addition, there was also a reduction in the proportion of contracts classified as “mortgage-related” business. It would appear that the impact of sustained mortgage rate increases and the pressures this has placed on consumer finances has filtered through into the term assurance market.
The Critical Illness (CI) market struggled in 2023, with overall premiums down 4%. The shift from accelerated CI to standalone CI continues, with a reduction in accelerated CI of 6% partially offset by an increase in standalone CI of 9%. The slowdown in the housing market will have played a part in this.
The Bank of England uses interest rates as a way of controlling inflation, and interest rates have increased significantly over 2023. There are signs that inflation levels are reducing, with further interest rate increases appearing less likely. However, the full impact of interest rate increases takes time to emerge, given the prevalence of fixed rate mortgages in the housing market. As the mortgage market drives protection sales, we expect the wider macro-economic environment to continue to exert significant influence over the protection market over the next 12 months.
Gen Re will continue to provide insights from the UK protection market, and report on the emergence of any new trends.
The ever-evolving protection market landscape changed once more as we entered into 2023. The COVID‑19 lockdowns that impacted the protection market in previous years have given way to economic challenges, with rising interest rates and sustained high levels of inflation placing a heavy burden on consumer finances.
Despite this uncertainty, the protection market has performed well over the first half of the year, with premiums written up around 8% overall in H1 2023 compared with H1 2022. The number of contracts has fallen slightly, leading to a higher average case size. Our Protection Pulse1 survey1 shows that the performance in H1 2023 varies by contract type, as can be seen in the table below.
The income protection (IP) market has enjoyed another strong start to the year, following on from the sustained growth seen across 2022. In Q1 2023 £24 million of IP premiums were written, the highest levels recorded since Protection Pulse reporting began. The growth in premiums exceeds that of the number of contracts written, driven potentially by high levels of wage growth in the employment market.
Underwritten and guaranteed acceptance whole of life (WOL) markets have both performed well during H1 2023, with premiums and contracts written significantly higher than H1 2022. The underwritten WOL market saw the highest levels of premiums written since 2016. The guaranteed acceptance WOL figures recovered somewhat from 2022 but remained well below pre-pandemic levels. The increase in yields driven by wider economic pressures is beneficial to WOL contracts, giving providers scope to price these contracts more keenly to attract new customers and grow the market.
The term mortality market showed a small increase in premiums written, almost 5% higher in H1 2023 compared to H1 2022, but still slightly below the record levels seen in H1 2021. The number of contracts written has fallen almost 6% between H1 2022 and H1 2023. The number of mortality contracts classified as mortgage-related in our survey has fallen for the last three quarters and coincides with a slowdown in the housing market caused by higher mortgage rates.
Critical Illness (CI) market premiums have remained relatively stable in H1 2023, although the ratio of standalone CI premiums compared to accelerated CI premiums continues to grow.
The cost-of-living crisis is likely to continue to affect consumer spending habits, particularly as the full impact of the multiple interest rate rises begins to be felt in the property market, and this may impact future protection new business sales.
Gen Re will continue to monitor the protection market, and report on the emergence of any new trends.
The protection market has adapted to a series of evolving challenges over the last 12 months. 2022 started off as 2021 began, with lockdowns in place requiring most of us to stay at home, as the threat of the new Omicron variant of SARS‑CoV‑2 loomed. As COVID‑19 restrictions eased early in the year and the pandemic gradually began to reduce in severity, an ever uncertain political and economic backdrop contributed to inflationary pressures placing a squeeze on consumer finances.
Despite this uncertain landscape, the protection market enjoyed a relatively successful year in 2022. Gen Re’s Protection Pulse survey gathers new business sales from all the major writers of insurance in the UK protection market. Our survey shows overall premiums written being comparable to 2021 levels, showing a slight fall of 1% from £767 million to £760 million.
The highlight of the year was the Income Protection (IP) market. This has well and truly recovered from the brief downturn in 2020 and we are pleased to report another very successful year of growth in premiums. The market grew by 21% in premiums written since 2021, and comfortably surpassed the high of £69 million in 2019. The renewed interest in IP follows the ending of the UK government-backed furlough scheme, which highlighted the value of this type of protection to consumers.
The term mortality market showed a slight reduction from the record levels seen in 2021, with a c.2% reduction overall. While the first half of the year showed an 8% reduction in premiums written against 2021, the market rallied in the second half of the year and grew 4% compared to H2 2021. One likely contributor to this is UK house sale completions: according to government statistics, completions over the first half of 2022 fell 28% compared with 2021, although sales were up 3% in the second half of the year relative to 2021.1
Critical Illness (CI) market premiums have remained relatively stable in 2022, although the ratio of standalone CI premiums compared to accelerated CI premiums continues to grow.
As observed in 2021, there were contrasting fortunes within the two whole of life (WOL) markets. The underwritten WOL market grew almost 9% in 2022 with the market returning to pre-pandemic levels. The guaranteed WOL market continues to contract, and has done so sharply in 2022, with premiums written falling by 27% compared with 2021. We have seen a few players pull out of the guaranteed WOL market in recent years and the increased cost of living, particularly affecting the lower socioeconomic segments, may also be contributing to reduced sales.
The ongoing cost of living crisis is likely to impact consumer spending habits in the short to medium term, and could impact protection new business sales going forward. Gen Re will continue to monitor the protection market, and report on the emergence of any new trends.
2021 started with lockdown in the country and, like 2020, it once again brought great uncertainty to individuals and businesses alike, in terms of what challenges the then current wave of COVID‑19 would bring, how best to deal with these, and for how long they would persist. Tempering this uncertainty was the start of the vaccine rollout and promising results in vaccine trials.
Despite the initial uncertainty in 2021, the Protection industry appears to have bounced back well and we are pleased to report that total annual premium equivalent (APE) for 2021 has grown by 7% on the previous year. Total APE for 2021 in the Gen Re Protection Pulse survey was just shy of £770 million compared to £717 million reported for 2020. The excellent 2021 figures have brought the market just 1.5% short of 2019’s record-breaking sales figures.
The success of 2021 can be largely attributed to the increase in the Term Assurance market, driven predominately by a buoyant property market. According to the UK government’s national statistics,1 more homes were sold in H2 2021 than in any other period reported since 2007.
2021 brought continued growth to Term Assurance sales: this grew by 8.4% compared to 2020 and 2019, with total APE reaching a record-breaking £361 million for the year.
We also saw significant growth in Income Protection, with an increase of 12% compared to 2020 and falling about 4% short of 2019’s figures. Critical Illness (CI) grew by 6% over the last year – this product’s sales were particularly hurt by the effects of the COVID‑19 pandemic in 2020 and there is still some way to go for CI to get back to 2019 pre-pandemic sales levels.
There were contrasting fortunes for the two Whole of Life products. The underwritten Whole of Life market achieved a growth of almost 25% in APE compared to 2020, although it is still lower than 2019. In contrast, there was a 10.5% decline for the Whole of Life Guaranteed market in APE sales compared to the previous year. This was the only product line that declined in sales from 2020 into 2021 and probably reflects the uncertainty of product providers in 2020 and 2021 about the outlook for a product with guaranteed acceptance.
The recovery in the Protection industry has been positive, and these figures reinforce the value that consumers place in having Protection policies. However, new challenges await the industry as the cost of living increases in the UK are likely to have an impact on new Protection sales. We will continue to monitor the impact of this as 2022 progresses.
Since the start of the Covid‑19 pandemic more than 18 months ago, there has been considerable volatility in the level of protection sales, with the various product lines impacted to differing degrees. Sales during the first half of the year have proven no exception.
However, despite the UK having had some degree of restrictions over the whole of the first half of the year, H1 had the highest level of protection sales in recent times, with sales even higher than in 2019. This is especially encouraging given the harsh environment the industry has faced. Overall sales are up 8.6% from the first half of 2020 and 2.4% up from the first half of 2019.
At a product level, the major driver of the increase is Term Assurance sales, which are up 12.1% compared to the same point in 2020, and 14.3% up against the 2019 position. This continues the growth seen in recent years for this product. This should not come as too much of a surprise. According to the government national statistics, we saw more homes sold in Q1 of this year in the UK than any other period reported since 2005.1 The demand for housing was at an all-time high as buyers looked to purchase properties that better suits their revised needs, and before the temporary stamp duty relief ended on 1st October 2021.
Also performing well is the standalone critical illness, which has continued to grow despite the pandemic: H1 sales are 8.7% higher than at the same point in 2020, and sales have now increased for five successive half year periods. Accelerated CI, on the other hand, is performing less well: although sales increased in 2021 by 7.2%, premium levels are below that of 2017, with the 15% reduction in 2020 sales having a significant impact.
Income Protection was another product that had a fall due to the pandemic, with a reduction in sales of 14% in 2020; the first half of 2021 had sales increasing by 5.7%, although premium levels are still c. 5% below that of 2019. As the economy continues to recover and with the furlough scheme finishing in September, we hope to see a return to the growth levels seen pre‑pandemic.
Guaranteed Acceptance Whole of Life sales are comparable to that of the corresponding first half of 2019 and 2020. However, underlying this is a very strong Q1 but a weak Q2, with the drop-off of Q2 sales far greater this year than historically, with a 38% reduction compared to a more typical 15% between these two quarters. We will continue to monitor this to see if this is a one-off or a systemic change. Sales of the underwritten Whole of Life continues to decline: whilst there was a 9.2% increase in premium income during the first half of the year compared to 2020, sales are c. 40% down from the 2015 level. It remains to be seen whether the removal of some of the underwriting restrictions that were introduced during the Covid pandemic will help boost sales.
With the restrictions in the UK having eased on the 19th July and the early positive trends we are seeing, we remain optimistic that the industry will bounce back in the second half of the year as the recovery gathers pace, and with the Covid‑19 pandemic hopefully becoming under control.
2020 was a testing year for many businesses and industries, and the Protection market was no exception. With the first “stay at home” order issued on 23 March, it was difficult to predict how COVID‑19 would shape the world, the impact it would have on the global economy and the individual impact on each and every one of us.
While 2019 was another record-breaking year for the UK Protection market, 2020 saw premiums return closer to 2018 levels, with total APE for the year coming in at £718 million, down about 8% from the prior year. We saw a slump across most product lines in 2020, with the Term Assurance market notably remaining flat. The relative “outperformance” of Term Assurance was likely correlated to the housing boom fuelled by the stamp duty holiday introduced in July 2020. Premium volumes linked to mortgages were similar to 2019, making up 26.0% of total sales.
The Underwritten Whole of Life market experienced a close to 30.0% decline and there was a 6.8% decrease in the Guaranteed Acceptance Whole of Life plans. Critical Illness was also significantly hurt by the pandemic, with sales down almost 13.0%. While overall APE for the year was down, it was interesting to note that overall policies by count were only down 1.2%, although this is largely driven by the first quarter where new policies were up 7.5%.
Income Protection sales, the fastest growing segment of the market prior to 2020, paint a similar picture with sales down 15.5%. While there was a large initial uptake of policies in March 2020 (up 43.0% from February), when the uncertainty surrounding the pandemic was arguably at its height, it was not unexpected to see volumes drop over the year as providers re‑evaluated their offerings in light of emerging risks caused by the pandemic and the economic uncertainty surrounding it.
Distribution channel mix remained broadly the same as 2019. With 59% of policies coming through from the independent advice route, 24% from restricted advice and 17% from the non-advised channel. Unsurprisingly, all channels took a hit on sales, with the non-advised being the least adversely affected with sales down 4.3%. Independent advice and restricted advice were down 9.5% and 6.4% respectively.
Whilst overall volumes were down in 2020, there were signs of emerging recovery of sales in the second half of the year. Before the start of the pandemic, Q1 volumes grew by 5.3% compared to Q1 2019. Once the pandemic hit, Q2 and Q3 saw a significant decline in sales, followed by early indications of recovery in Q4.
With the government’s latest announcement of a potential return to “normality” by the end of June, thanks to the UK’s rapid rollout of the COVID‑19 vaccine that is well underway, we should remain hopeful that volumes will return to pre-pandemic levels in 2021. As an industry, now more than ever we should be raising consumer awareness about the value and benefit of protection products. The UK public has, during the pandemic, become increasingly aware of its own health and mortality risk. People have also, in many cases, seen how difficult it can be to survive on savings alone in times of economic hardship. We, therefore now, have a timely opportunity to communicate the importance of the products we sell and the valuable services our industry provides.
The contents of this Protection Pulse market summary are observations made by Gen Re based upon information available at the time. This report does not constitute professional advice and recipients should seek their own advice if they consider it necessary to do so. Gen Re assumes no liability whatsoever for the contents of this report or any reliance placed upon its contents by a recipient.
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