Table of Contents

Overview 1
Catalyst 1
Summary 1
Executive Summary 2
Market focus 2
Sector issues 2
Competitor Issues 2
Distribution Dynamics 2
Table of Contents 4
Table of figures 5
Table of tables 6
Market Focus 7
The total UK protection market has shrunk over the last five years 7
The UK term assurance market is spiralling downwards 8
No recovery of the term assurance market is in sight 8
New business premiums for the total market have dropped by a further 6% 8
Changes in critical illness insurance have caused with rider term assurance to lose its appeal 10
The term assurance share of the protection market has declined between 2002 and 2006 11
Persistency of policies is an issue in the term assurance industry 12
Datamonitor forecasts growth in both the mortgage and non mortgage-related sides of the term market 14
The price war has had no impact on the protection gap 15
The UK protection gap may widen further 15
While personal debt goes up, consumers do not seek adequate financial protection 15
Higher premiums for older applicants may push down cover levels 16
Young Brits seem to be more concerned by price rather than product suitability 16
Negative press intensifies consumers' mixed feelings about life insurance 16
Competition is fierce 16
Price continues to be the critical feature for term assurance 16
The scope for price reductions may not yet be fully exhausted 17
The mortgage-related sector is less focused on price 17
Insurers have been sorely disappointed on Pension Term Assurance (PTA) 17
The Government's decision to remove tax relief on PTA has dealt a blow to the industry 17
Government's decision has been met with condemnation 18
There may still be loopholes in pensions term assurance that can be exploited 18
A variety of key products exist in the term assurance market 19
Level term assurance 19
Decreasing term assurance 19
Mortgage-related term assurance 19
Increasing term assurance 19
Renewable term assurance 19
Convertible term assurance 19
Pension term assurance 20
Sector issues 21
Term assurance causes mixed feelings 21
Negative press adds distrust to dislike 21
Market decisions have been driven by the price war 21
Price continues to be a critical issue for insurers 21
Price has turned into the defining feature for term assurance 21
The price war is not over yet 21
However, price cuts have undermined distribution 22
The prerequisite for success is a sound distribution strategy 22
Insurers seem to have underrated the importance of distribution 22
The underwriting process is too complex for both consumers and distributors 22
Electronic underwriting could become the norm for the majority of applications 22
The discussion regarding the efficiency of tele-underwriting is on-going 23
Legal and General has been awarded for its Interactive Underwriting 23
Key strategies exist for providers to boost term assurance sales 24
Ongoing education should improve the consumer perception of term assurance 24
Providers need to rethink distribution strategies 24
Distribution partners need incentives 24
Online sales should offer as much advice as possible 24
Providers will need to make term assurance easier to sell 24
Providers need to differentiate the product 25
Competitor issues 26
The term assurance market is highly concentrated 26
In 2005, the top 3 competitors controlled 54% of the market for both level and decreasing term assurance 26
Legal & General alone has a market share of close to 20% in level term assurance 26
Legal & General is also the clear market leader in decreasing term assurance 26
Company profiles reveal strategic differences 27
Legal & General -a key strength is distribution 27
The products give only limited flexibility 27
Life Insurance and Mortgage Life Insurance 27
Family Life Insurance Plan 28
Legal & General distributes through a most extensive channel network 28
A strong relationship with IFAs, coupled with a broad distribution network, is one of L&G's strengths 29
Friends Provident - differentiation through service levels 29
The products show a good degree of flexibility 29
Friends Provident wants to be different in service 30
Friends Provident has recognized the need to expand its distribution network 30
HBOS - using its strength in the mortgage market 30
Life insurance is offered in the context of a comprehensive protection package 30
HBOS concentrates on the less competitive mortgage-related segment 30
HBOS' strength in the mortgage market gives it a head start in the protection business 30
Aviva - competing on price in the front line 31
Norwich Union policies are simple and standardized 31
Norwich Union aims at process optimization to facilitate the low-cost offering 31
AEGON Scottish Equitable - differing through product quality 31
The product package can cover a comprehensive protection need 32
Flexibility is the key feature of AEGON Scottish Equitable's offering 32
White-labeled products allow for new market entries 33
Greenbee is expanding into the life insurance market 33
Innovation is centering on underwriting 33
Electronic underwriting appears to be the most efficient way forward 33
Norwich Union is at the forefront of tele-underwriting 33
Legal & General has developed interactive underwriting 33
Distribution Dynamics 35
Term assurance distribution remains focused on the IFA channel 35
Single-tie sales of savings related term assurance have been hit by a lack of customer confidence in the product 35
Bancassurers have increased their share of the mortgage related term market 36
Datamonitor forecasts solid growth in single tied distribution of savings related bancassurance 39
Banks are set to continue increasing their presence in the mortgage related term assurance market 41
Providers are looking to broaden their distribution strategy 43
Insurers are looking more into direct sales 43
The pressure has increased to expand online sales capabilities 43
Problems are arising between direct sales and advisor channels 43
Non-advised sales have been harshly criticized 43
APPENDIX 44
Definitions 44
Term assurance 44
Convertible term assurance 44
Decreasing term assurance 44
Increasing term assurance 44
Level term assurance 44
Mortgage-related term assurance 44
Pension term assurance 44
Renewable term assurance 45
Further reading 45
Ask the analyst 45
Datamonitor consulting 45
Disclaimer 45
List of Tables
Table 1: Total UK protection market 2002-2006, new business premiums £m 8
Table 2: The UK term assurance market 2002-2006, segmented by mortgage related and non mortgage-related, new business premiums £m APE 10
Table 3: % share of UK protection market attributed to each of the 3 key product, 2002-2006 12
Table 4: Comparison of business in force value to new business premiums written 2001-2005, £m 13
Table 5: Forecast term assurance segmented by mortgage-related and non mortgage-related 2007-2011, new business premiums £m 15
Table 6: Savings related term assurance distribution 2002-2006, new business premiums £m 36
Table 7: Mortgage related term assurance distribution 2002-2006, new business premiums £m 38
Table 8: Forecast savings related term assurance distribution 2007-2011, new business premiums £m 40
Table 9: Forecast mortgage related term assurance new business, 2007-2011 new business premiums £m 42
List of Figures
Figure 1: Premiums in the stand-alone term assurance market have declined 7
Figure 2: Since 2003, new business premiums have dropped by 10% compounded annually, 2002-6 9
Figure 3: In 2006, with rider policies accounted for 40% of the total new business, compared to 46% in 2002 11
Figure 4: % share of UK protection market attributed to each of the 3 key product 12
Figure 5: Comparison of business in force value to new business premiums written, £m 13
Figure 6: Mortgage related products will continue to dominate the market 14
Figure 7: The Top 10 players controlled 88% of the new business in the level term assurance segment in 2005 26
Figure 8: Legal & General is the dominating force for decreasing cover products, 2005 27
Figure 9: The largest decline in savings related term assurance distribution has been through non-bancassurance single tie advisors 35
Figure 10: Banks have increased their share of the mortgage related term assurance market 37
Figure 11: Datamonitor forecasts solid growth in single tied distribution of savings related bancassurance 39
Figure 12: The distribution of mortgage related term assurance will remain largely unchanged 41