Decline in Sales of Long-Term Protection Policies Following Economic Changes

Sales of new long-term individual protection policies have experienced a 5.5 per cent decline, according to a recent report by Swiss Re‘s Term & Health Watch. The study reveals that a total of 1,997,450 term assurance, whole life, critical illness, and income protection policies were purchased in the past year.

The downturn in sales continues a trend from the previous year, with a 7.8 per cent decrease observed in 2022. However, the performance varied across different product categories. Notably, the term insurance market suffered a significant 10.4 per cent drop, along with a decline in critical illness policies.

Conversely, positive growth was recorded in income protection, guaranteed acceptance whole of life, and underwritten whole of life insurance. Joanna Scott, the Technical and Industry Affairs Manager at Swiss Re’s L&H division and co-author of the report, attributed the overall sales decrease to rising mortgage rates.

Scott explained that the Bank of England‘s consecutive interest rate hikes, leading to increased mortgage rates, impacted the market. While not all protection sales are linked to mortgages, many protection conversations occur in this space, influencing the overall trend.

She further pointed out that distribution changes, particularly a significant drop in non-advised sales in the protection market, contributed to the decline. Some non-advised firms, responding to consumer duty regulations, shifted to advised firms or ceased operations entirely, affecting the volume of level-term assurance policies.

Despite the challenges, the report highlighted encouraging growth in income protection. Scott noted that only 7 per cent of income protection sales are non-advised, potentially shielding this segment from the broader decline seen in other areas. Industry initiatives, such as those led by the Income Protection Taskforce, have been instrumental in promoting income protection products.

Looking ahead, Scott emphasized the resilience of advised sales, indicating relative stability when non-advised numbers are excluded. Despite the tough market conditions of recent years, advisers have managed to acquire new customers and maintain existing cover, reflecting their commendable efforts in navigating the evolving landscape.

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