Next year’s protection industry will be a bit different from years gone by. From January life offices will be taxed differently and client premiums across the board will no longer vary by gender. But what else might happen?
We should probably expect a new entrant or two, a few new distribution deals and a raft of pricing changes, especially at the start of the year when providers jostle for position – not just in terms of being the cheapest but in making sure they don’t get too exposed at one end of the other.
Most people are predicting new business sales will fall, potentially by as much as 30 per cent to 40 per cent – not just because the cost of protection for most people will be dearer, but because the ability to switch around and save money on price will become a very limited option.
Nobody knows exactly how many of the 1.5 million life and critical illness policies sold each year in the UK are just existing policyholders jumping around, but whatever the number is it could be said that new sales could fall by the same amount.
Speak to any individual life office, or adviser for that matter, and of course they all expect their own market share to increase.
Rising prices doesn’t automatically mean people will buy less – but rising prices does mean people with existing cover will probably stay where they are. So it will be interesting to see who bears the brunt of the fall in new business.
On the plus side, and hopefully helping to limit any fall in new sales is the expected migration of non-protection advisers into the market.
From Retail Distribution Review qualified wealth planners to non-RDR advisers who just want to write protection, some firms are already reporting an increase in protection sales from different adviser sources.
We could also see the launch of the proposed simple life insurance product, which will indeed be simple – no joint life option, no waiver, no terminal illness benefit, no decreasing or increasing cover, and so on. It is likely the product will not be allowed to have any exclusions, which means it will be underwritten, at least to an extent, which should keep the price low.
Whether or not this is more about large institutions selling lots of products than a genuine attempt to close the protection gap probably isn’t the point. The industry is engaging with Government perhaps like never before, which all being well, can only be a good thing for the future.
And talking of the future it is possible, indeed likely even that the new regulator will take a look at the commission structure in protection.
The Financial Conduct Authority will want to make a name for itself and removing all remaining commission options could be an option, albeit one that could quickly result in direct consumer detriment. Perhaps more likely is a restructure, than a complete removal.