Sales of life assurance products will stage a strong comeback over the next four years and IFAs should be able to hold onto a position of strength in the distribution chain, says Datamonitor.
The consultant forecasts the UK life assurance market to grow by £1.8bn to £5bn in the period, as stock markets recover and pension products remain popular.
Overall sales by life companies will depend not least on them learning the lessons of the past few years in which consumers have become wary of products such as endowments and with profits, which Datamonitor says “have failed”.
Bancassurers will take an increasing share of the total market for life products, the consultant adds, but it will not be all plain sailing.
Its figures suggest bancassurers took a 15% share of the annual premium market and a 21% share of the single premium market in 2003.
”Banks’ potential for cross-selling life products with mortgages has been harnessed and now savings products are being increasingly sold through this channel too,” the consultant says.
”Going forward, bancassurers will continue to increase their share of the annual premium market to 26% by 2008, although their share of the single premium market will grow very slowly as IFAs will maintain their dominance in the savings product market.”
”IFAs will continue to control over half of the single premium market, as products and consumers require quality advice and understanding. However, IFAs have seen their market share of annual premiums impacted by the inroads made by the bancassurance channel.”
”As protection products become increasingly commoditised, IFAs will find their market share of annual premium stagnating at little over 40% over the next four years. Despite warnings about the rise of the bancassurance channel in the depolarization era, IFAs will still be the key sales channel for long-term insurance products.”
Another issue IFAs and their clients must deal with is continued consolidation on the supply side.
Datamonitor sees survival of the top ten by sales, but a gradual squeezing out of the market of smaller and medium-sized players.
Much of this change will be led by bancassurers such as HBOS, which in 2002 surpassed Aviva as the top UK life assurer with a 12% market share, Datamonitor says.
Other evidence of the role of bancassurers includes Legal & General’s “distributional relationships”, which have enable the company to focus on maintaining “manufacturing excellence”.
Product types will also see their fortunes vary.
It is clear consumers feel wary of long term savings products, but even as sales of endowments and savings products have fallen away, sales of protection products have more than made up the gap, with term assurance now the “star product”.
Noting that endowments “have failed”, Datamonitor says they nonetheless could stage a recovery as a product type if providers learn the lessons of the past few years, and if stockmarkets continue to recover.IFAonline
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