Only 111,780 income protection policies were sold last year and 536,143 new critical illness policies, 8.2 per cent less than the previous year. New life business amounted to 1,541,930 policies, down 6.1 per cent. The only growth area was whole of life, where sales jumped 12.4 per cent last year.
The life insurance gap remained stable at £2.3trn in 2007 while the income protection gap widened for the fifth year in a row to £190bn, according to the report.
UK life and health head of marketing Mark Johnson says: “The life industry cannot use a perceived lack of consumer demand as an excuse not to raise people’s awareness of the need for income protection. As sales of new individual income protection policies continue to decline, leading to increases in the size of the income protection gap, the industry must face up to the fact that this product is now in the ‘last-chance saloon’. Fundamental changes are needed to ensure that it does not disappear altogether, and the industry as a whole must promote the benefits of income protection if we are to make progress in helping consumers help themselves.”
Swiss Re is calling on providers to develop new propositions for consumers, particularly in the mass market, which focus on simplicity and making products easier to buy. It is calling on advisers to stop paying “lip-service” to income protection and make more proactive efforts to promote its benefits to consumers and providers to establish more direct sales channels. The reinsurer is also calling on its competitors to work with providers to ensure that innovation does not suffer at the hands of risk-management protocols.