Swiss Re sees signs of ‘cautious optimism’ for market after tough times

The market has rebounded from a “tough” period of slowdown and uncertainty due to the pandemic but the weakening UK economic conditions and a sustained period of higher inflation could turn things around in the near future, a new report by  Swiss Re has warned.

The reinsurer’s latest Term & Health Watch report suggests that the improved mortgage market was a key driver for recovery following its effective closure for a number of months in 2020.

Individual protection insurance sales in the UK rose by 6.3% in 2021 as the market rebounded from a tough 2020. In 2021 alone insurers sold 2.29 million new term assurance, whole life, critical illness and income protection policies, versus 2.16 million in 2020.

According to  Swiss Re, the market reached its highest level of new business since 2004 in 2019, with more than 2.18 million individual policies purchased during this period.

“The market is gradually tiptoeing back, with most business lines displaying positive growth or even sitting ahead of where they were in 2019. But while the numbers are undeniably encouraging, cautious optimism is the order of the day when it comes to market growth,” said Abbie Marlow (pictured),  Swiss Re client manager and a joint author of the report.

“Perhaps the most critical factor right now for future market confidence is current public sentiment,” Marlow explained. “In the shorter term, the consumer caution caused by weakening UK economic conditions may affect end-customers’ decisions around existing commitments, including insurance products. This in turn could impact new protection sales over the coming period.”

The report also revealed some broader challenges for the industry. For example, three times more critical illness policies were purchased than income protection, while average new sums assured for males were higher across term, critical illness and income protection when compared with females.

Ron Wheatcroft, technical manager, L&H UKI, at  Swiss Re and one of the joint-authors of Term and Health Watch 2022, said: “The growth in individual critical illness sales has been particularly pleasing and is, in part, a reflection of the revival of the mortgage sector in 2021.  Critical illness sales continue to dwarf those of income protection policies – despite protecting incomes being a clear industry priority.

“This, of course, may be partly due to more people having their income protected through a workplace arrangement than those who purchase critical illness cover through work.”

The study also found that business protection numbers grew in 2021 by just 2.0% (following a 43.1% drop between 2019 and 2020).

Wheatcroft said: “Business protection and Relevant Life numbers continue to disappoint, a sign that smaller firms have found taking on new commitments more difficult in the pandemic and its aftermath. Against the current uncertain backdrop, however, business retention strategies should be at the fore in supporting businesses and consumers to keep their protection products and benefits going. Opening up greater access to protection will be all the more critical moving forward as the industry has to be more inclusive.

“There is no doubt that the use of signposting is a way to expand opportunities for all our customers and potential customers and make the market more customer-centric – whereas historically it has been aligned more to the legislative and regulatory framework under which we operate. Nowhere is this more apparent than in the industry’s dealings with its corporate customers,” he concluded.

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