Individual protection sales suffered their first fall for seven years, with income protection down by nearly a tenth, as Covid-19 took its toll on the insurance industry, according to Swiss Re’s latest Term and Health Watch.
The report, produced in conjunction with iPipeline, shows that sales of individual protection policies fell 1.2 per cent to 2.16 million last year.
That was down on the 2.18m individual policies purchased in 2019, the highest level of new business since 2004.
This latest analysis now indicates that a mix of national lockdowns and sluggish economic output may have put households off insuring themselves and their families.
The report shows 2,157,263 new term assurance, whole life, critical illness and income protection policies were purchased in 2020.
Income protection was the hardest hit, with sales falling by 9.5 per cent after several years of growth
Sales of guaranteed acceptance whole life assurance fell by 4.2 per cent, while individual new term assurance sales, life cover only, increased by 2.4 per cent.
Individual critical illness sales dropped by 3.3 per cent with cover attached to a term assurance policy decreasing by 8.9 per cent.
The report shows 49.9 per cent of all new level term only policies were arranged without advice, a 2.5 per cent increase since 2019.
Swiss Re client manager and joint report author Abbie Marlow says: “2020 will always be remembered as the year Covid-19 changed our lives. We often see when people are under financial pressure that insurance tends to be one of the first places they look to cut costs.
Term and Health Watch 2021 showed that business protection policy sales fell for the second consecutive year, with a 43.1% drop during 2020
“While the long-term impact of both on the insurance market remains to be seen, it’s encouraging to see that, in the main, protection sales actually fared reasonably well against such a challenging backdrop.
“Many of the difficulties faced have not gone away however, so it will be interesting to see whether peoples’ increased awareness of their own mortality and health, coupled with the resulting financial impact, leads to an uptick in demand for protection in the years to come.”
The report found that income protection sales dropped by 9.5 per cent during 2020 after several years of growth. Notably, the three year trends in the gender mix of new business show that sales of new income protection policies purchased by males fell by 12.4 per cent, which is consistent with the drop in new policies providing benefits for just one or two years which are typically sold to manual occupations.
Swiss Re technical manager and joint author of the report Ron Wheatcroft says: “While disappointing, this drop isn’t hugely surprising given the number of products providing a maximum benefit in claim of one or two years that were withdrawn or had restrictions applied as a result of the pandemic.
“Nonetheless, the long-term prospects for growing the income protection market alongside the increase in membership of employer-sponsored policies remains positive. Our study points to a number of specific opportunities for growth as the UK comes out of lockdown, particularly in the housing sector, both to protect lending and rental commitments.
“New business protection sales continue to disappoint as firms faced the challenge of maintaining their businesses through the pandemic. We saw a similar impact with new Relevant Life Policies which fell by 17.5 per cent.
“Among SMEs in particular, there is an urgent need to build greater resilience by protecting them against the loss of key individuals as a result of death or disability. The use of signposting offers a great opportunity to drive progress here and, utilised correctly, could be a major factor in providing more support to businesses to protect themselves against these risks.”
On the growing number of policies being purchased without advice, Wheatcroft added: “Our new way of life means that the number of policies being purchased online or independent of an adviser is only going to grow as we move forward. While this is fine where the consumer chooses to do so, it is incumbent on us all to ensure that the quality of the purchase, including making sure that the proceeds are designated for the intended beneficiary, is of a standard and quality that they would expect.
“A better quality approach can only improve the persistency of business written. If there was any doubt about the need to consider the quality of what is presented, there should be none, with the FCA now consulting on a Duty of Care to deliver good outcomes in retail consumer markets.”
