Record numbers of people have taken out income protection insurance to protect their finances against the risk of a serious accident or illness stopping them working.
The latest figures from the Association of British Insurers (ABI) provide a snapshot of the trends in the UK’s individual protection insurance market. They show that individual sales of income protection in 2023 were at a record high with standalone critical illness sales almost four times higher than 10 years ago. In contrast, sales of mortgage-related term assurance sales fell as activity in the UK housing market slowed.
Sales of new individual income protection policies hit 247,000 last year, a 16% increase on 2022 and the highest level since the ABI started collecting the data in 2000.
Nearly all (97%) individual income protection products were sold with advice, highlighting the important role advisers have to play in increasing consumers’ financial resilience. The additional support services policies offer can also help people return to work after an accident or illness, further safeguarding their finances.
Yvonne Braun, Director of Policy, Long Term Savings, Health and Protection at the ABI, said: “Financial resilience – the ability to withstand a financial shock – is a hugely important issue. It’s encouraging to see that so many people recognise that income protection and critical illness insurance are an important part of financial planning and play a crucial role in providing a financial safety net.”
Individual protection market overview
Overall sales of individual contracts (including term assurance, critical illness, income protection, whole of life, relevant life plans and business protection) in 2023 fell to the lowest volumes seen since 2018. Some 2.1 million individual contracts were sold in 2023 compared to 2.2 million in 2022.
Term assurance
Sales of term assurance products were at the lowest levels since 2017 with 1.5 million policies sold last year. Non-mortgage related term assurance sales fell 8% in 2023 following stronger sales over the previous four years. Mortgage-related term sales fell 10% year-on-year with 449,000 policies sold.
Standalone critical illness
Sales of standalone critical illness policies totalled 75,700 - 7% higher than in 2022 and almost four times higher than ten years ago.
Products explained
Critical Illness: A policy that pays out a lump sum, or ongoing payments, when the policyholder is diagnosed with a specified illness. Cancer is the most common cause of claim.?
Term Life Insurance: A policy that will cover the policyholder for a specified number of years, usually until retirement age. This policy pays a lump sum, commonly used to cover outstanding mortgage payments, if the policyholder dies unexpectedly or prematurely.?
Income Protection: A policy designed to help fill income gaps when a person is unable to work due to illness or injury. It will usually cover a percentage of the policyholder's salary and will often provide support services to help employees back into work.
*Figures include sales of term assurance, critical illness, income protection, whole of life, relevant life plans and business protection policies. A standalone or individual critical illness policy does not include joint life assurance.
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