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Protection sales forecast to fall while claims rise

US-based reinsurer RGA is warning that the UK protection market will fall by 10 per cent this year and claims will soar.

Research given to Money Marketing from a broker workshop run by RGA says advisers are being unrealistically optimistic on volumes for 2005 and the general health of the protection market.

Comparing the market size for 2005 against last year, 17 out of the 40 brokers asked by RGA said protection volumes will drop by no more than 5 per cent. But RGA says business will decline by 10 per cent and expects claims to increase by 50 per cent year on year.

The firm also warns brokers that claims’ handling departments do not have the skills to deal with this increase. But 65 per cent of brokers say they are very to reasonably confident that claims’ teams can handle claims and protect brokers’ interests.

RGA is sceptical that changes to pension legislation will increase opportunities to boost pension term assurance sales.

Of the brokers participating in the workshop, 43 per cent said pension term insurance would make up 5 to 10 per cent of total term sales and 35 per cent said it could make between 10 and 30 per cent.

RGA head of sales and marketing Jason Hurley says many protection providers and reinsurers are unrealistically expecting an increase in the profile of income protection and warns that IP will never achieve the volumes of critical-illness insurance.

Hurley says: “Interest-ingly, no brokers said commission would be cut. But advisers have not woken up to the fact that the market could fall again next year.”

Hogarth Financial Services IFA Keith Crowe says: “We have had good critical-illness business since the beginning of the year but do not expect significant volumes in income protection or pension term insurance – clients just are not interested.”

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