The income protection (IP) market has not developed much over the last five years, although sales are now growing steadily and there has been a resurgence in the popularity of guaranteed rates. Friends Provident (guaranteed rates) was the market leader in the mid-’90s, challenged by Norwich Union (reviewable rates) and Zurich Life (both) and a number of other reviewable rate companies. Four to five years ago both Swiss Life and Canada Life entered the independent financial adviser (IFA) market, offering aggressively priced guaranteed rates which undercut the market leader.
Success was muted initially, due to both a natural mistrust of new entrants and – in Canada Life’s case – its background as a direct sales office. But realisation slowly dawned that both had a valid proposition and sales have increased.
The penetration of Swiss Life and Canada Life has been primarily at the expense of companies such as Norwich Union, Zurich and Royal & SunAlliance, rather than Friends Provident, which has continued to demonstrate that service and a good claims-paying record are just as important as price. Canada Life, having bought market share, has recently raised its rates (behind largely cosmetic product enhancements). However, it remains competitive.
Looking forward, we have a new regulator on the block in the shape of General Insurance Standards Council (GISC). (Is there anyone else out there unable to say these letters without adding an O on the end and breaking into an old Ottowan single?). This should impact on the accident and sickness market but leave traditional IP unchanged.
One of the big successes of recent years has been Scottish Provident’s Self Assurance, a menu-based protection product. This offers the flexibility to offer different cover levels on different products to different lives, all under one contract. It has helped IFAs to sell three or more products at one go. It has also kept apparently commodity products as advice-driven and saved paperwork.
Into the bargain, clients have received good value under the ‘buy two get the third half price’ bulk buy principle. Other similar launches will enable other providers such as Legal & General, Scottish Equitable Protection (from May) and Friends Provident itself to offer competitively priced IP on the back of other protection sales and capture (or retain) market share in the process.