Protection market still recovering, according to FSA

Wednesday, September 1, 2010

The Financial Services Authority (FSA) have recently announced new sales figures which suggest that the protection market is still recovering from the economic downturn, but is being bolstered by sales of critical illness protection within the UK. According to the report by the FSA, pure protection product sales dropped by less than one percent, to 597,986 over the course of last year, from 1,217 the year before.

This drop is significant, in that it shows a strengthening in the market when compared to figures released for previous years. In 2008 and 9, the total fell by almost seventy thousand. According to the FSA, the provision of advice to customers is critical when it comes to securing sales in the protection market. Over ninety percent of sales were achieved following advice given to customers from experts and consultants.

According to the figures released, almost ninety percent of all pure protection products were sold through the advice of non-providers. Despite this, insurance experts are voicing their concerns that having only a handful of primary insurance providers within the UK market is resulting in a concentration of products and policies being provided and sold by the five top insurers, leading to a lack of healthy competition.

The FSA has undertaken an equivalent study for the past five years, but the economic downturn has previously demonstrated worrying drops in sales figures. Now, however, the UK is seeing a gradual upturn once again. Since 2005, pure protection products saw a drop in sales of almost forty percent, from 981,715 in 2005/06, to 597,986 in 2009/10.

The FSA defines pure protection products as Critical Illness sold as a benefit to accompany mortgage protection and term assurance, income protection (IP) and standalone critical illness. Both areas of Critical Illness cover enjoyed an upsurge over the course of last year, from 2% to 452,082 from 441,930, and standalone sales boosted by 5% to 41,802 from 39,896.

Income protection is still low down on the sales list, decreasing by 11% to 104,102 from 117,377. Critical Illness sold as a standalone product has been hit hard by reduced sales, halving its overall sales total in the first year of the study, from 96,060 to the present level.

The figures generated by the FSA were taken from 534 firms with 65 reporting on pure protection products.