Gross written premiums in the UK’s life insurance category fell by 57% between 2007 and 2012. Despite regaining momentum in 2012, a strong return to growth is not expected over the forecast period according to a new report by Timetric.
The value of gross written premiums in the category declined from GBP56.5 billion in 2007 to GBP24.2 billion in 2012. The category represents the majority of life insurance contracts in the UK, accounting for 90.8% of the total gross written premiums. Continued macroeconomic uncertainty is likely to constrain growth in the category and life insurers will face competition from the banking and wealth management sector offering savings and investment alternatives.
The UK life insurance category is forecast to grow by an average of 3.5% over the next five years. Despite adverse factors, this expansion will be underpinned by the country’s strengthening economy, aging population and renewed consumer confidence. Unit-linked investments are expected to dominate the segment. Life insurance penetration represents 1.6% of the country’s GDP, and has remained significantly below its pre-crisis levels. Life insurance density also fell sharply, totaling a value of GBP384.1 in 2012.
Evolution of distribution channels
Insurance brokers are the main channel for distribution of life insurance products in the UK. However, independent financial advisers (IFAs) are expected to face increased pressure since the Retail Distribution Review (RDR) was introduced. RDR implies that advisors can no longer take commission on sales of retail investment products, including life insurance policies, and instead, will have to charge their clients directly. The role of low-cost channels in securing new business will grow significantly over the forecast period, with e-commerce and direct marketing expected to further dominate the distribution of guaranteed acceptance plans.