The protection market has adapted to a series of evolving challenges over the last 12 months. 2022 started off as 2021 began, with lockdowns in place requiring most of us to stay at home, as the threat of the new Omicron variant of SARS-CoV-2 loomed. As COVID-19 restrictions eased early in the year and the pandemic gradually began to reduce in severity, an ever uncertain political and economic backdrop contributed to inflationary pressures placing a squeeze on consumer finances.
Despite this uncertain landscape, the protection market enjoyed a relatively successful year in 2022. Gen Re’s Protection Pulse survey gathers new business sales from all the major writers of insurance in the UK protection market. Our survey shows overall premiums written being comparable to 2021 levels, showing a slight fall of 1% from £767 million to £760 million.
The highlight of the year was the Income Protection (IP) market. This has well and truly recovered from the brief downturn in 2020 and we are pleased to report another very successful year of growth in premiums. The market grew by 21% in premiums written since 2021, and comfortably surpassed the high of £69 million in 2019. The renewed interest in IP follows the ending of the UK government-backed furlough scheme, which highlighted the value of this type of protection to consumers.
The term mortality market showed a slight reduction from the record levels seen in 2021, with a c.2% reduction overall. While the first half of the year showed an 8% reduction in premiums written against 2021, the market rallied in the second half of the year and grew 4% compared to H2 2021. One likely contributor to this is UK house sale completions: according to government statistics, completions over the first half of 2022 fell 28% compared with 2021, although sales were up 3% in the second half of the year relative to 2021.1
Critical Illness (CI) market premiums have remained relatively stable in 2022, although the ratio of standalone CI premiums compared to accelerated CI premiums continues to grow.
As observed in 2021, there were contrasting fortunes within the two whole of life (WOL) markets. The underwritten WOL market grew almost 9% in 2022 with the market returning to pre-pandemic levels. The guaranteed WOL market continues to contract, and has done so sharply in 2022, with premiums written falling by 27% compared with 2021. We have seen a few players pull out of the guaranteed WOL market in recent years and the increased cost of living, particularly affecting the lower socioeconomic segments, may also be contributing to reduced sales.
The ongoing cost of living crisis is likely to impact consumer spending habits in the short to medium term, and could impact protection new business sales going forward. Gen Re will continue to monitor the protection market, and report on the emergence of any new trends.
1 Source: UK Monthly property Transaction tables https://www.gov.uk/government/statistics/monthly-property-transactions-completed-in-the-uk-with-value-40000-or-above, last accessed 27.02.2023
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