Judging by trends in values over the last three years and my own dodgy attempt at actuarial extrapolation and sixth-form maths from 40 years ago, income protection (IP) new business premiums could outstrip critical illness (CI) by 2029 – just five years away.
With individual IP new business premiums at an all-time high in H1 (since Gen Re started its Protection Pulse), IP sales are predicted to break through £100m by year end.
According to the Income Protection Task Force (IPTF), we’ve witnessed double-digit growth in IP policy sales and new business values year-on-year (YOY) since 2020, with new business values up more than 30% YOY in the first half of this year.
The pandemic and furlough scheme surfaced the importance of income and challenged the invincibility complex of many
Conversely, CI new business premiums (combining accelerated and standalone) stayed level in H1, with a slight drop in accelerated, bolstered by a healthy rise in standalone. After the stamp duty boost in 2021, we’ve seen mortgage-related, decreasing ACI sales fall away.
More advisers are having more protection conversations with clients, with protecting their income and lifestyle higher on the priority list.
The pandemic and furlough scheme certainly surfaced the importance of income among all corners of the population and challenged the invincibility complex of many. Since then, we’ve witnessed headwinds of increasing living costs and pressures on household expenses, but IP sales continue to rise.
IPTF may have missed their audacious goal of doubling IP sales in their first three-years but it’s a possibility before the end of the 2020s
We can applaud the efforts of the IPTF leadership in their collective drive to encourage and support more advisers to talk protecting income with confidence, to better understand how IP works and to demonstrate its invaluable lifestyle-maintaining benefits.
They may have missed their big, hairy, audacious goal of doubling IP sales in their first three-year tenure but, based on growth so far, it’s a distinct possibility before the end of the 2020s.
Is this sustainable, though?
While IP still only represents 12% of overall protection sales, it feels like there’s plenty of gas in the conversation tank to make it the first protection priority for more advisers, every time.
With intelligent targeting and indicative pricing, this organisation experienced mind-blowing results
There are also opportunities to revisit existing clients, to uncover and pinpoint the importance of protecting income. Recently, one leading mortgage-advice network undertook a targeted campaign to the self-employed segment of their existing clients (where IP may not have been discussed or taken up initially).
With intelligent targeting and indicative pricing, this organisation experienced mind-blowing results, resulting in better client outcomes.
And talking of good outcomes, we can’t ignore the regulatory focus of Consumer Duty, with the duty-of-care principle meaning a protection need can no longer be ignored or unseen. I’ve seen that drive different behaviours among advisers and adviser firms, particularly among those for whom protection may not be a core area of expertise.
The wider adoption of IP is impressive, yet it suffers from shortcomings and glass ceilings
They are referring and signposting to someone better qualified who can look after their clients’ protection needs for them (and assume that regulatory responsibility). Win-win-win.
The wider adoption of IP is impressive, yet it suffers from shortcomings and glass ceilings. How often do I hear desperate cries of “we need real innovation” (and to be true, I ask for it too)?
The product concept is designed for an age gone by. It struggles to fit the needs of contemporary life, fluid work status and consumers’ expected ‘buying experience’. In its present form, IP requires advice. Yet millions of consumers are no longer exposed to the typical protection conversation trigger. They rent and their income is likely their most important asset; the one that needs protecting most.
It is entirely possible to take a new lifestyle insurance and experience to consumers
This is an area where I expect to see revolution. With the rise of embedded insurance (it’s coming!) powered by digital technology, shared data, non-financial services brands (with customers of their own) and fresh thinking – and a sprinkle of human touch – it is entirely possible to take a new lifestyle insurance and experience to consumers.
IP – but not exactly as we know it – will outstrip CI in five years’ time. What a headline that would be.
Justin Harper is chief marketing officer at Lifesearch
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