Demand for CI has stabilised at around half a million policies a year. According to Swiss Re’s Term & Health Watch 2010, the 530,214 policies sold in 2009 represented a 3.8% increase over 2008, and it would be a surprise if the next Term & Health Watch shows any significant deterioration for 2010.
Early indications are that protection sales generally did pretty well during 2010 despite a sluggish mortgage market.
Not surprisingly, those insurers that sell primarily on price seem to have fared better than those that do not. Legal & General reports its IFA market share to have increased by 30% between the end of the third quarter of 2009 and the end of the third quarter of 2010 while Aviva is pleased that its new business volumes were largely flat during 2010 – as they had fallen by around 10% the previous year. On the other hand, Bright Grey and Scottish Provident, which place more emphasis on quality features and benefits, estimate that their combined CI sales fell by around 10% in 2010.
Ian Smart, head of product development and technical support at Bright Grey and Scottish Provident, says: “The market has been very tough because of the dip in the mortgage market and, whereas about half of our business was mortgage-related prior to the credit crunch, the proportion is now nearer a third. But we don’t believe that the mortgage market will continue to be as bad as some people are predicting, and some mortgage brokers and other intermediaries are reacting and trying to sell more CI for family protection and looking up clients with mortgages who didn’t have CI in the first place.
Obviously the ruling this March by the European Court of Justice that will prevent insurers from using gender as a basis for calculating premiums with effect from December 2012 is going to do little to help pricing (see pages 20-21). Many commentators fear that protection rates generally will rise across the board as insurance companies try to build in the new risk and have to update their systems.
Even without this ruling, Henrietta Oxlade, an IFA with City-based Bond Wealth Management, confirms that price often tends to be a major issue at present, especially once clients have reached their late 30s and the premiums involved have become much steeper. She recalls in particular a recent meeting with a 38 year-old male smoker she had quoted for on a number of options.
“He pointed out that the life cover had terminal illness cover that paid out the sum assured if you received a 12 month terminal prognosis,” explains Oxlade. “So I found it hard to persuade him to take out CI because he reasoned that if he got something really nasty he would get a payout he could use while he was still alive, and if he got a critical illness that allowed him to get back to work quickly he wouldn’t have that much need of cover anyway.