Life Insurance in the United Kingdom, Key Trends and Opportunities to 2017

Transcription

1 Life Insurance in the United Kingdom, Key Trends and Opportunities to 2017 Market Intelligence Report Reference code: IS0362MR Published: August Timetric John Carpenter House 7 Carmelite Street London EC4Y 0BS United Kingdom Tel: +44 (0) Fax: +44 (0)

2 EXECUTIVE SUMMARY 1 Executive Summary Life insurance was the largest segment in the UK insurance industry in 2012, accounting for 70.4% of total industry premiums. It is also one of the largest life insurance segments in Europe in gross written premium terms. The impact of the financial crisis, and subsequent European debt crisis, during the review period ( ) resulted in a decline in consumer confidence. This decline adversely affected the demand for long-term insurance products, resulting in an overall decline in the UK life segment. However, the segment is expected to record growth over the forecast period following various initiatives taken by the government and life insurers. Life insurance products are predominantly distributed through brokers, with this channel accounting for 66.2% of the segment s new business written premiums in The segment s value declined at a review-period CAGR of 3.9% to reach GBP131.3 billion (US$208.2 billion in 2012). However, the segment is expected to record a forecast-period CAGR of 1.5% to reach a projected value of GBP141.2 billion (US$223.8 billion) in Growth will be driven by improvements in the UK s economy, with IMF estimates expecting GDP to grow at a forecast-period CAGR of 2.2%. In addition, the expected implementation of Solvency II in January 2015 will result in stricter solvency and capital requirements, better risk management and higher profits. Implementation of Retail Distribution Review (RDR) to ensure growth The introduction of the Retail Distribution Review (RDR), a government initiative designed to increase consumer trust and confidence in insurance products and services, in December 2012 is expected to drive future growth in the life segment. The RDR was implemented by the Financial Conduct Authority (FCA) and includes measures designed to implement professional standards for insurance advisers, as well as regulate both commissions earned, and fees paid by, financial professionals. In the short-term, RDR will possibly affect the growth of life insurance segment on account of expected reduction in the number of Independent Financial Advisors (IFAs) which forms the major chunk of distribution channel in the UK s life insurance segment. However, in the long run on account of improvement in the quality of advice provided to consumers and reduction in mis -selling of financial product; the consumer will gain confidence in the industry. Rebuilding consumer confidence in life insurance is vital for segment growth over the forecast period, as this confidence declined significantly during the review period as a result of the global financial crisis. Gender-neutral insurance pricing The Court of Justice of the European Union (CJEU) passed the Test-Achats ruling in December 2012 to implement gender-neutral pricing policies in the insurance industry. The ruling banned the use of gender as a risk factor when calculating insurance premiums. The cost of life insurance products, particular those relating to income protection and retirement such as annuities, increased as a result. Life segment is expected to consolidate over the forecast period The life segment is highly concentrated, with the 10-leading insurance companies accounting for 80.2% of the written premium value of the life insurance segment in The segment is expected to consolidate over the forecast period following the impact of the financial crisis, European debt crisis and the forthcoming implementation of the EU s Solvency II directives. Solvency II is expected to force many smaller companies to exit the industry or be acquired by larger firms in order to achieve the required solvency level. Life Insurance in the United Kingdom, Key Trends and Opportunities to 2017 Page 2

3 TABLE OF CONTENTS 1 Executive Summary Introduction What is this Report About? Definitions Methodology Regional Market Dynamics Overview Market trends Market size Life Insurance Segment Scale and Penetration Total gross written premium Premium per capita Life insurance penetration (as a percentage of GDP) Growth Gross written premium Gross written premium per capita Efficiency and Risk Loss ratio Combined ratio Incurred losses per capita Incurred losses as a percentage of GDP Distribution Channels Direct marketing Bancassurance Agencies The UK Insurance Industry Attractiveness Insurance Industry Size, Key Industry Trends and Drivers Life Insurance Outlook Life Insurance Growth Prospects by Category Individual life Individual general annuity Individual pension Individual marriage and birth insurance Individual unit-linked insurance Individual others Group life insurance Life Insurance in the United Kingdom, Key Trends and Opportunities to 2017 Page 3

4 6.1.8 Group superannuation Life Insurance Growth Prospects by Product Type Individual single-premium policies Individual non-single-premium policies Group single-premium policies Group non-single-premium policies Analysis by Distribution Channel Direct Marketing Bancassurance Agencies E-commerce Brokers Porter s Five Forces Analysis UK Life Insurance Bargaining Power of Supplier: Low to Medium Bargaining Power of Buyer: Medium to High Barriers to Entry: Medium Intensity of Rivalry: High Threat of Substitutes: Medium Reinsurance Growth Dynamics and Challenges Reinsurance Segment Size, Reinsurance Segment Size by Insurance Segment, Governance, Risk and Compliance Legislation Overview and Historical Evolution Legislation Trends by Type of Insurance Life insurance regulatory trends Property insurance regulatory trends Motor insurance regulatory trends Marine, aviation and transit insurance regulatory trends Personal accident and health insurance regulatory trends Compulsory Insurance Employer s liability insurance Motor third-party liability insurance Merchant shipping compulsory insurance National Insurance Scheme Supervision and Control International Association of Insurance Supervisors European Insurance and Occupational Pensions Authority Prudential Regulation Authority Financial Conduct Authority Non-Admitted Insurance Regulatory Trends Life Insurance in the United Kingdom, Key Trends and Opportunities to 2017 Page 4

5 Overview Intermediaries Market practices Fines and penalties Company Registration and Operations Types of insurance organization Establishing a local company Foreign ownership Types of license Capital requirements Solvency margins Reserve requirements Investment regulations Statutory return requirements Fee structure Taxation Insurance premium or policy taxation Withholding taxes on premium paid overseas Corporate tax VAT Captives Legal System Introduction Access to court Alternative dispute resolution (ADR) Competitive Landscape and Strategic Insights Overview Leading Companies in the Segment Comparison of Four Leading Life Insurers Gross written premium Net earned premium Paid claims Aviva Life Plc Company Overview Aviva Life Plc key facts Aviva Life Plc key financials Standard Life Plc Company Overview Standard Life Plc key facts Standard Life Plc key financials Lloyds Banking Group Plc Company Overview Lloyds Banking Group Plc key facts Lloyds Banking Group Plc key financials Life Insurance in the United Kingdom, Key Trends and Opportunities to 2017 Page 5

6 11.7 Legal & General Group Plc Company Overview Legal & General Group Plc key facts Legal & General Group Plc key financials Aegon UK Plc Company Overview Aegon UK Plc key facts Aegon UK Plc key financials Prudential Plc Company Overview Prudential Plc key facts Prudential Plc key financials Friends Life Group Plc Company Overview Friends Life Group Plc key facts Zurich Insurance Co. (UK) Ltd Company Overview Zurich Insurance Co. (UK) Ltd key facts Zurich Insurance Co. (UK) Ltd key financials The Royal London Mutual Insurance Society Limited Company Overview The Royal London Mutual Insurance Society Limited key facts The Royal London Mutual Insurance Society Limited key financials Old Mutual Plc Company Overview Old Mutual Plc key facts Old Mutual Plc key financials Business Environment and Country Risk Business Confidence Market capitalization trend London Stock Exchange, The UK Economic Performance GDP at constant prices (US$) GDP per capita at constant prices (US dollar) GDP at current prices (US dollar) GDP per capita at current prices (US dollar) GDP by key segments Agriculture, hunting, forestry and fishing net output at current prices (EUR) Agriculture, hunting, forestry and fishing net output at current prices (US dollar) Agriculture, hunting, forestry and fishing net output as a percentage of GDP Manufacturing net output at current prices (EUR) Manufacturing net output at current prices (US$) Manufacturing net output at current prices as a percentage of GDP Mining, manufacturing and utilities net output at current prices (EUR) Mining, manufacturing and utilities net output at current prices (US$) Mining, manufacturing and utilities at current prices, as percentage of GDP Construction net output at current prices (EUR) Construction net output at current prices (US$) Construction net output at current prices as a percentage of GDP Life Insurance in the United Kingdom, Key Trends and Opportunities to 2017 Page 6

7 Inflation rate Exports as a percentage of GDP Imports as a percentage of GDP Exports growth Imports growth Annual average exchange rate GBP US$ Infrastructure Quality and Availability Commercial vehicles exports total value Commercial vehicles imports total value Automotive exports total value Automotive imports total value Total internet subscribers Labor Force Labor force Unemployment rate Demographics Gross national disposable income (US$) Total population Urban and rural population Median age of population Age distribution of the total population Appendix Methodology Contact Timetric About Timetric Timetric s Services Disclaimer Life Insurance in the United Kingdom, Key Trends and Opportunities to 2017 Page 7

8 LIST OF FIGURES Figure 1: Leading Global Insurance Markets Economies and Populations, Figure 2: Leading Global Insurance Markets Growth Trends in the Insurance Industry (%), Figure 3: Leading Global Insurance Markets Total Industry Values by Segment (US$ Billion), Figure 4: Leading Global Insurance Markets Life Insurance Gross Written Premiums (US$ Billion), Figure 5: Leading Global Insurance Markets Life Insurance Premium Per Capita (US$), Figure 6: Leading Global Insurance Markets Life Insurance Penetration as a Percentage of GDP (%), 2011 and Figure 7: Leading Global Insurance Markets Life Insurance Gross Written Premium Grow th (%), Figure 8: Leading Global Insurance Markets Life Insurance Gross Written Premium Per Capita Grow th (%), Figure 9: Leading Global Insurance Markets Life Insurance Loss Ratio (%), 2011 and Figure 10: Leading Global Insurance Markets Life Insurance Combined Ratios (%), 2011 and Figure 11: Leading Global Insurance Markets Life Insurance Incurred Losses Per Capita (US$), 2011 and Figure 12: Leading Global Insurance Markets Life Insurance Incurred Losses as a Percentage of GDP (%), 2011 and Figure 13: Leading Global Insurance Markets Direct Marketing Share of Life Insurance New Business Gross Written Premium (%), Figure 14: Leading Global Insurance Markets Bancassurance Share of Life Insurance New Business Gross Written Premium (%), Figure 15: Leading Global Insurance Markets Agencies Share of Life Insurance New Business Gross Written Premium (%), Figure 16: UK Insurance Overall Written Premium by Segment (GBP Billion), Figure 17: UK Insurance Dynamics by Segment (%), Figure 18: UK Life Insurance Written Premium by Category (GBP Billion), Figure 19: UK Life Insurance Written Premium by Category (% Share), 2012 and Figure 20: UK Life Insurance Dynamics by Category (%_, Figure 21: UK Life Insurance Earned Premium (GBP Billion), Figure 22: UK Life Insurance Earned Premium (GBP Billion), Figure 23: UK Life Insurance Sum Assured (GBP Billion), Figure 24: UK Life Insurance Sum Assured (GBP Billion), Figure 25: UK Life Insurance Paid Claims (GBP Billion), Figure 26: UK Life Insurance Paid Claims (GBP Billion), Figure 27: UK Life Insurance Incurred Loss (GBP Billion), Figure 28: UK Life Insurance Incurred Loss (GBP Billion), Figure 29: UK Life Insurance Loss Ratio (%), Figure 30: UK Life Insurance Loss Ratio (%), Figure 31: UK Life Insurance Commissions and Expenses (GBP Billion), Figure 32: UK Life Insurance Commissions and Expenses (GBP Billion), Figure 33: UK Life Insurance Combined Ratio (%), Figure 34: UK Life Insurance Combined Ratio (%), Figure 35: UK Life Insurance Frauds and Crimes (GBP Billion), Figure 36: UK Life Insurance Frauds and Crimes (GBP Billion), Figure 37: UK Life Insurance Total Assets (GBP Billion), Figure 38: UK Life Insurance Total Assets (GBP Billion), Figure 39: UK Life Insurance Total Investment Income (GBP Billion), Figure 40: UK Life Insurance Total Investment Income (GBP Billion), Figure 41: UK Life Insurance Retentions (GBP Billion), Figure 42: UK Life Insurance Retentions (GBP Billion), Figure 43: UK Life Insurance Investments Portfolio (GBP Billion), Figure 44: UK Life Insurance Investments Portfolio (%), 2008 and Figure 45: UK Life Insurance Penetration (%), Figure 46: UK Life Insurance Density (Number of Policies per Capita), Figure 47: UK Life Insurance Number of Active Policies (Million), Figure 48: UK Life Insurance Number of Active Policies (Million), Figure 49: UK Life Insurance Premium per Capita (GBP), Figure 50: UK Individual Life Insurance Number of Active Policies (Million), Figure 51: UK Individual Life Insurance Number of Active Policies (Million), Figure 52: UK Individual Life Insurance Written Premium (GBP Billion), Figure 53: UK Individual Life Insurance Written Premium (GBP Billion), Figure 54: UK Individual General Annuity Number of Active Policies (Million), Figure 55: UK Individual General Annuity Number of Active Policies (Million), Figure 56: UK Individual General Annuity Written Premium (GBP Billion), Figure 57: UK Individual General Annuity Written Premium (GBP Billion), Figure 58: UK Individual Pension Number of Active Policies (Million), Life Insurance in the United Kingdom, Key Trends and Opportunities to 2017 Page 8

9 Figure 59: UK Individual Pension Number of Active Policies (Million), Figure 60: UK Individual Pension Written Premium (GBP Billion), Figure 61: UK Individual Pension Written Premium (GBP Billion), Figure 62: UK Individual Marriage and Birth Insurance Number of Active Policies (Thousand), Figure 63: UK Individual Marriage and Birth Insurance Number of Active Policies (Thousand), Figure 64: UK Individual Marriage and Birth Insurance Written Premium (GBP Billion), Figure 65: UK Individual Marriage and Birth Insurance Written Premium (GBP Billion), Figure 66: UK Individual Unit-Linked Insurance Number of Active Policies (Million), Figure 67: UK Individual Unit-Linked Insurance Number of Active Policies (Million), Figure 68: UK Individual Unit-Linked Insurance Written Premium (GBP Billion), Figure 69: UK Individual Unit-Linked Insurance Written Premium (GBP Billion), Figure 70: UK Individual Others Number of Active Policies (Thousand), Figure 71: UK Individual Others Number of Active Policies (Thousand), Figure 72: UK Individual Others Written Premium (GBP Billion), Figure 73: UK Individual Others Written Premium (GBP Billion), Figure 74: UK Group Life Insurance Number of Active Policies (Thousand), Figure 75: UK Group Life Insurance Number of Active Policies (Thousand), Figure 76: UK Group Life Insurance Written Premium (GBP Billion), Figure 77: UK Group Life Insurance Written Premium (GBP Billion), Figure 78: UK Group Superannuation Number of Active Policies (Million), Figure 79: UK Group Superannuation Number of Active Policies (Thousand), Figure 80: UK Group Superannuation Written Premium (GBP Billion), Figure 81: UK Group Superannuation Written Premium (GBP Billion), Figure 82: UK Individual Single-Premium Number of Active Policies (Million), Figure 83: UK Individual Single-Premium Number of Active Policies (Million), Figure 84: UK Individual Single-Premium Written Premium (GBP Billion), Figure 85: UK Individual Single-Premium Written Premium (GBP Billion), Figure 86: UK Individual Non-Single-Premium Number of Active Policies (Million), Figure 87: UK Individual Non-Single-Premium Number of Active Policies (Million), Figure 88: UK Individual Non-Single-Premium Written Premium (GBP Billion), Figure 89: UK Individual Non-Single-Premium Written Premium (GBP Billion), Figure 90: UK Group Single-Premium Number of Active Policies (Thousand), Figure 91: UK Group Single-Premium Number of Active Policies (Thousand), Figure 92: UK Group Single-Premium Written Premium (GBP Billion), Figure 93: UK Group Single-Premium Written Premium (GBP Billion), Figure 94: UK Group Non-Single- Premium Number of Active Policies (Thousand), Figure 95: UK Group Non-Single- Premium Number of Active Policies (Thousand), Figure 96: UK Group Non-Single- Premium Written Premium (GBP Billion), Figure 97: UK Group Non-Single- Premium Written Premium (GBP Billion), Figure 98: UK Life Insurance New Business Written Premium by Distribution Channel (% Share), 2012 and Figure 99: UK Life Insurance Direct Marketing Commission Paid (GBP Billion), Figure 100: UK Life Insurance Direct Marketing Commission Paid (GBP Billion), Figure 101: UK Life Insurance New Business Written Premium Through Direct Marketing (GBP Billion), Figure 102: UK Life Insurance New Business Written Premium Through Direct Marketing (GBP Billion), Figure 103: UK Life Insurance New Policies Sold Through Direct Marketing (Thousand), Figure 104: UK Life Insurance New Policies Sold Through Direct Marketing (Thousand), Figure 105: UK Life Insurance Number of Direct Marketing Distributors, Figure 106: UK Life Insurance Number of Direct Marketing Distributors, Figure 107: UK Life Insurance Bancassurance Commission Paid (GBP Billion), Figure 108: UK Life Insurance Bancassurance Commission Paid (GBP Billion), Figure 109: UK Life Insurance New Business Written Premium Through Bancassurance (GBP Billion), Figure 110: UK Life Insurance New Business Written Premium Through Bancassurance (GBP Billion), Figure 111: UK Life Insurance New Policies Sold Through Bancassurance (Thousand), Figure 112: UK Life Insurance New Policies Sold Through Bancassurance (Thousand), Figure 113: UK Life Insurance Number of Bancassurance Distributors, Figure 114: UK Life Insurance Number of Bancassurance Distributors, Figure 115: UK Life Insurance Commission Paid to Agencies (GBP Billion), Figure 116: UK Life Insurance Commission Paid to Agencies (GBP Billion), Figure 117: UK Life Insurance New Business Written Premium Through Agencies (GBP Billion), Figure 118: UK Life Insurance New Business Written Premium Through Agencies (GBP Billion), Figure 119: UK Life Insurance New Policies Sold Through Agencies (Thousand), Figure 120: UK Life Insurance New Policies Sold Through Agencies (Thousand), Figure 121: UK Life Insurance Number of Agencies, Figure 122: UK Life Insurance Number of Agencies, Life Insurance in the United Kingdom, Key Trends and Opportunities to 2017 Page 9

10 Figure 123: UK Life Insurance E-Commerce Commission Paid (GBP Billion), Figure 124: UK Life Insurance E-Commerce Commission Paid (GBP Billion), Figure 125: UK Life Insurance New Business Written Premium Through E-Commerce (GBP Billion), Figure 126: UK Life Insurance New Business Written Premium Through E-Commerce (GBP Billion), Figure 127: UK Life Insurance New Policies Sold Through E-Commerce (Thousand), Figure 128: UK Life Insurance New Policies Sold Through E-Commerce (Thousand), Figure 129: UK Life Insurance Number of E-Commerce Distributors, Figure 130: UK Life Insurance Number of E-Commerce Distributors, Figure 131: UK Life Insurance Commission Paid to Brokers (GBP Billion), Figure 132: UK Life Insurance Commission Paid to Brokers (GBP Billion), Figure 133: UK Life Insurance New Business Written Premium Through Brokers (GBP Billion), Figure 134: UK Life Insurance New Business Written Premium Through Brokers (GBP Billion), Figure 135: UK Life Insurance New Policies Sold Through Brokers (Thousand), Figure 136: UK Life Insurance New Policies Sold Through Brokers (Thousand), Figure 137: UK Life Insurance Number of Brokers, Figure 138: UK Life Insurance Number of Brokers, Figure 139: The UK Life Insurance Segment Five Forces Analysis Figure 140: UK Premium Ceded to Reinsurance by Category (GBP Billion), Figure 141: UK Premium Ceded to Reinsurance by Category (Percentage Share), 2012 and Figure 142: UK Reinsurance Dynamics by Category (%), Figure 143: UK Premium Ceded to Reinsurance by Insurance Segment (GBP Billion), Figure 144: UK Reinsurance Dynamics by Insurance Segment (%), Figure 145: UK Life Insurance Percentage of Reinsurance Ceded (%), Figure 146: UK Life Insurance Percentage of Reinsurance Ceded (%), Figure 147: UK Insurance Regulatory Framew ork Figure 148: UK The Three Pillars of Solvency II Figure 149: UK Insurance Supervision and Control at Various Levels Figure 150: UK Insurance Regulatory Framew orks for Company Registration and Operation Figure 151: UK Life Insurance Written Premiums by Leading Companies (% Share), 2010 and Figure 152: Gross Written Premium of Four-Leading UK Life Insurers (GBP Billion), Figure 153: Net Earned Premium of Four-Leading UK Life Insurers (GBP Billion), Figure 154: Paid Claims of Four-Leading UK Life Insurers (GBP Billion), Figure 155: UK Stock Exchange Market Capitalization (US$ Billion), Figure 156: UK GDP at Constant Prices (US$ Billion), Figure 157: UK GDP Per Capita at Constant Prices (US$), Figure 158: UK GDP at Current Prices (US$ Billion), Figure 159: UK GDP Per Capita at Current Prices (US$), Figure 160: UK GDP by Key Segments (%) 2009 and Figure 161: UK Agriculture, Hunting, Forestry and Fishing Net Output at Current Prices (EUR Billion), Figure 162: UK Agriculture, Hunting, Forestry and Fishing Net Output at Current Prices (US$ Billion), Figure 163: UK Agriculture, Hunting, Forestry and Fishing Net Output as a Percentage of GDP (%), Figure 164: UK Manufacturing Net Output at Current Prices (EUR Billion), Figure 165: UK Manufacturing Net Output at Current Prices (US$ Billion), Figure 166: UK Manufacturing Net Output at Current Prices as a Percentage of GDP (%), Figure 167: UK Mining, Manufacturing and Utilities Net Output at Current Prices (EUR Billion), Figure 168: UK Mining, Manufacturing and Utilities Net Output at Current Prices (US$ Billion), Figure 169: UK Mining, Manufacturing and Utilities at Current Prices as a Percentage of GDP (%), Figure 170: UK Construction Net Output at Current Prices (EUR Billion), Figure 171: UK Construction Net Output at Current Prices (US$ Billion), Figure 172: UK Construction Output at Current Prices as a Percentage of GDP (%), Figure 173: UK Inflation Rate (%), Figure 174: UK Exports as a Percentage of GDP (%), Figure 175: UK Imports as a Percentage of GDP (%), Figure 176: UK Exports Growth (%), Figure 177: UK Imports Growth (%), Figure 178: UK Annual Average Exchange Rate US$ GBP, Figure 179: UK Commercial Vehicles Exports Total Value (US$ Billion), Figure 180: UK Commercial Vehicles Imports Total Value (US$ Billion), Figure 181: UK Automotive Exports Total Value (US$ Billion), Figure 182: UK Automotive Imports Total Value (US$ Billion), Figure 183: UK Internet Subscriptions (Million), Figure 184: UK Size of Labor Force in Age Group (Million), Figure 185: UK Unemployment Rate (%), Figure 186: UK Gross National Disposable Income (US$ Billion), Life Insurance in the United Kingdom, Key Trends and Opportunities to 2017 Page 10

11 Figure 187: UK Total Population (Million), Figure 188: UK Urban and Rural Population (%), Figure 189: UK Median Age of Population (Year), Figure 190: UK Population Distribution by Age (%), Life Insurance in the United Kingdom, Key Trends and Opportunities to 2017 Page 11

12 LIST OF TABLES Table 1: Insurance Industry Definitions Table 2: UK Insurance Overall Written Premium by Segment (GBP Billion), Table 3: UK Insurance Overall Written Premium by Segment (US$ Billion), Table 4: UK Insurance Overall Written Premium by Segment (GBP Billion), Table 5: UK Insurance Overall Written Premium by Segment (US$ Billion), Table 6: UK Insurance Segmentation (Percentage Share), Table 7: UK Life Insurance Written Premium by Category (GBP Billion), Table 8: UK Life Insurance Written Premium by Category (US$ Billion), Table 9: UK Life Insurance Written Premium by Category (GBP Billion), Table 10: UK Life Insurance Written Premium by Category (US$ Billion), Table 11: UK Life Insurance Earned Premium (GBP Billion), Table 12: UK Life Insurance Earned Premium (GBP Billion), Table 13: UK Life Insurance Sum Assured (GBP Billion), Table 14: UK Life Insurance Sum Assured (GBP Billion), Table 15: UK Life Insurance Paid Claims (GBP Billion), Table 16: UK Life Insurance Paid Claims (GBP Billion), Table 17: UK Life Insurance Incurred Loss (GBP Billion), Table 18: UK Life Insurance Incurred Loss (GBP Billion), Table 19: UK Life Insurance Loss Ratio (%), Table 20: UK Life Insurance Loss Ratio (%), Table 21: UK Life Insurance Commissions and Expenses (GBP Billion), Table 22: UK Life Insurance Commissions and Expenses (GBP Billion), Table 23: UK Life Insurance Combined Ratio (%), Table 24: UK Life Insurance Combined Ratio (%), Table 25: UK Life Insurance Frauds and Crimes (GBP Billion), Table 26: UK Life Insurance Frauds and Crimes (GBP Billion), Table 27: UK Life Insurance Total Assets (GBP Billion), Table 28: UK Life Insurance Total Assets (GBP Billion), Table 29: UK Life Insurance Total Investment Income (GBP Billion), Table 30: UK Life Insurance Total Investment Income (GBP Billion), Table 31: UK Life Insurance Retentions (GBP Billion), Table 32: UK Life Insurance Retentions (GBP Billion), Table 33: UK Individual Life Insurance Number of Active Policies (Thousand), Table 34: UK Individual Life Insurance Number of Active Policies (Thousand), Table 35: UK Individual Life Insurance Written Premium (GBP Billion), Table 36: UK Individual Life Insurance Written Premium (GBP Billion), Table 37: UK Individual General Annuity Number of Active Policies (Thousand), Table 38: UK Individual General Annuity Number of Active Policies (Thousand), Table 39: UK Individual General Annuity Written Premium (GBP Billion), Table 40: UK Individual General Annuity Written Premium (GBP Billion), Table 41: UK Individual Pension Number of Active Policies (Thousand), Table 42: UK Individual Pension Number of Active Policies (Thousand), Table 43: UK Individual Pension Written Premium (GBP Billion), Table 44: UK Individual Pension Written Premium (GBP Billion), Table 45: UK Individual Marriage and Birth Insurance Number of Active Policies (Thousand), Table 46: UK Individual Marriage and Birth Insurance Number of Active Policies (Thousand), Table 47: UK Individual Marriage and Birth Insurance Written Premium (GBP Billion), Table 48: UK Individual Marriage and Birth Insurance Written Premium (GBP Billion), Table 49: UK Individual Unit-Linked Insurance Number of Active Policies (Thousand), Table 50: UK Individual Unit-Linked Insurance Number of Active Policies (Thousand), Table 51: UK Individual Unit-Linked Insurance Written Premium (GBP Billion), Table 52: UK Individual Unit-Linked Insurance Written Premium (GBP Billion), Table 53: UK Individual Others Number of Active Policies (Thousand), Table 54: UK Individual Others Number of Active Policies (Thousand), Table 55: UK Individual Others Written Premium (GBP Billion), Table 56: UK Individual Others Written Premium (GBP Billion), Table 57: UK Group Life Insurance Number of Active Policies (Thousand), Table 58: UK Group Life Insurance Number of Active Policies (Thousand), Table 59: UK Group Life Insurance Written Premium (GBP Billion), Table 60: UK Group Life Insurance Written Premium (GBP Billion), Table 61: UK Group Superannuation Number of Active Policies (Thousand), Life Insurance in the United Kingdom, Key Trends and Opportunities to 2017 Page 12

13 Table 62: UK Group Superannuation Number of Active Policies (Thousand), Table 63: UK Group Superannuation Written Premium (GBP Billion), Table 64: UK Group Superannuation Written Premium (GBP Billion), Table 65: UK Individual Single-Premium Number of Active Policies (Thousand), Table 66: UK Individual Single-Premium Number of Active Policies (Thousand), Table 67: UK Individual Single-Premium Written Premium (GBP Billion), Table 68: UK Individual Single-Premium Written Premium (GBP Billion), Table 69: UK Individual Non-Single-Premium Number of Active Policies (Thousand), Table 70: UK Individual Non-Single-Premium Number of Active Policies (Thousand), Table 71: UK Individual Non-Single-Premium Written Premium (GBP Billion), Table 72: UK Individual Non-Single-Premium Written Premium (GBP Billion), Table 73: UK Group Single-Premium Number of Active Policies (Thousand), Table 74: UK Group Single-Premium Number of Active Policies (Thousand), Table 75: UK Group Single-Premium Written Premium (GBP Billion), Table 76: UK Group Single-Premium Written Premium (GBP Billion), Table 77: UK Group Non-Single-Premium Number of Active Policies (Thousand), Table 78: UK Group Non-Single-Premium Number of Active Policies (Thousand), Table 79: UK Group Non-Single-Premium Written Premium (GBP Billion), Table 80: UK Group Non-Single-Premium Written Premium (GBP Billion), Table 81: UK Life Insurance Direct Marketing Commission Paid (GBP Billion), Table 82: UK Life Insurance Direct Marketing Commission Paid (GBP Billion), Table 83: UK Life Insurance New Business Written Premium Through Direct Marketing (GBP Billion), Table 84: UK Life Insurance New Business Written Premium Through Direct Marketing (GBP Billion), Table 85: UK Life Insurance New Policies Sold Through Direct Marketing (Thousand), Table 86: UK Life Insurance New Policies Sold Through Direct Marketing (Thousand), Table 87: UK Life Insurance Number of Direct Marketing Distributors, Table 88: UK Life Insurance Number of Direct Marketing Distributors, Table 89: UK Life Insurance Bancassurance Commission Paid (GBP Billion), Table 90: UK Life Insurance Bancassurance Commission Paid (GBP Billion), Table 91: UK Life Insurance New Business Written Premium Through Bancassurance (GBP Billion), Table 92: UK Life Insurance New Business Written Premium Through Bancassurance (GBP Billion), Table 93: UK Life Insurance New Policies Sold Through Bancassurance (Thousand), Table 94: UK Life Insurance New Policies Sold Through Bancassurance (Thousand), Table 95: UK Life Insurance Number of Bancassurance Distributors, Table 96: UK Life Insurance Number of Bancassurance Distributors, Table 97: UK Life Insurance Commission Paid to Agencies (GBP Billion), Table 98: UK Life Insurance Commission Paid to Agencies (GBP Billion), Table 99: UK Life Insurance New Business Written Premium Through Agencies (GBP Billion), Table 100: UK Life Insurance New Business Written Premium Through Agencies (GBP Billion), Table 101: UK Life Insurance New Policies Sold Through Agencies (Thousand), Table 102: UK Life Insurance New Policies Sold Through Agencies (Thousand), Table 103: UK Life Insurance Number of Agencies, Table 104: UK Life Insurance Number of Agencies, Table 105: UK Life Insurance E-Commerce Commission Paid (GBP Billion), Table 106: UK Life Insurance E-Commerce Commission Paid (GBP Billion), Table 107: UK Life Insurance New Business Written Premium Through E-Commerce (GBP Billion), Table 108: UK Life Insurance New Business Written Premium Through E-Commerce (GBP Billion), Table 109: UK Life Insurance New Policies Sold Through E-Commerce (Thousand), Table 110: UK Life Insurance New Policies Sold Through E-Commerce (Thousand), Table 111: UK Life Insurance Number of E-Commerce Distributors, Table 112: UK Life Insurance Number of E-Commerce Distributors, Table 113: UK Life Insurance Commission Paid to Brokers (GBP Billion), Table 114: UK Life Insurance Commission Paid to Brokers (GBP Billion), Table 115: UK Life Insurance New Business Written Premium Through Brokers (GBP Billion), Table 116: UK Life Insurance New Business Written Premium Through Brokers (GBP Billion), Table 117: UK Life Insurance New Policies Sold Through Brokers (Thousand), Table 118: UK Life Insurance New Policies Sold Through Brokers (Thousand), Table 119: UK Life Insurance Number of Brokers, Table 120: UK Life Insurance Number of Brokers, Table 121: UK Reinsurance by Category (GBP Billion), Table 122: UK Reinsurance by Category (US$ Billion), Table 123: UK Reinsurance by Category (GBP Billion), Table 124: UK Reinsurance by Category (US$ Billion), Table 125: UK Premium Ceded to Reinsurance by Insurance Segment (GBP Billion), Life Insurance in the United Kingdom, Key Trends and Opportunities to 2017 Page 13

14 Table 126: UK Premium Ceded to Reinsurance by Insurance Segment (US$ Billion), Table 127: UK Premium Ceded to Reinsurance by Insurance Segment (GBP Billion), Table 128: UK Premium Ceded to Reinsurance by Insurance Segment (US$ Billion), Table 129: UK Life Insurance Percentage of Reinsurance Ceded (%), Table 130: UK Life Insurance Percentage of Reinsurance Ceded (%), Table 131: UK Life Insurance Regulatory Framework Table 132: UK Property Insurance Regulatory Framework Table 133: UK Motor Insurance Regulatory Framework Table 134: UK Benefits Under National Insurance Scheme Table 135: UK Capital Requirements for Long-term Insurers Table 136: UK Capital Requirements for General Insurers Table 137: UK Corporate Tax Rates for the Financial Year Table 138: UK VAT Rates in UK for Insurance Products Table 139: UK Life Insurance Written Premiums by Leading Companies (Percentage Share), 2010 and Table 140: Aviva Life Plc, Key Facts Table 141: Aviva Life Plc, Key Financials (GBP Million), Table 142: Standard Life Plc, Key Facts Table 143: Standard Life Plc, Key Financials (GBP Million), Table 144: Lloyds Banking Group Plc, Key Facts Table 145: Lloyds Banking Group Plc, Key Financials (GBP Million), Table 146: Legal & General Group Plc, Key Facts Table 147: Legal & General Group Plc, Key Financials (GBP Million), Table 148: Aegon UK Plc, Key Facts Table 149: Aegon UK Plc, Key Financials (GBP Million), Table 150: Prudential Plc, Key Facts Table 151: Prudential Plc, Key Financials (GBP Million), Table 152: Friends Life Group Plc, Key Facts Table 153: Zurich Insurance Co. (UK ) Ltd, Key Facts Table 154: Zurich Insurance Co. (UK ) Ltd, Key Financials (GBP Million), Table 155: The Royal London Mutual Insurance Society Limited, Key Facts Table 156: The Royal London Mutual Insurance Society Limited, Key Financials (GBP Million), Table 157: Old Mutual Plc, Key Facts Table 158: Old Mutual Plc, Key Financials (GBP Million), Life Insurance in the United Kingdom, Key Trends and Opportunities to 2017 Page 14

15 INTRODUCTION 2 Introduction 2.1 What is this Report About? This report is the result of extensive research into the life insurance segment in the UK, covering its dynamics and competitive landscape. It provides insights into the size and forecast for the overall life insurance segment, and categories such as individual and group insurance, and provides details of products in each category. This report also provides an overview of the leading companies in the life insurance segment, along with details of strategic initiatives undertaken. 2.2 Definitions All data is collected in local currency. All conversions into US dollars ( US$) of current and forecast data are made at the 2012 average annual conversion rate. All values in tables are displayed to one decimal place, and growth rates may therefore appear inconsistent with absolute values due to rounding. For the purposes of this report, the review period is and the forecast period is The key insurance industry terms covered in the report are defined below: Table 1: Insurance Industry Definitions Term Definition Ceding company Incurred loss Claim ratio Commission and expenses Comprehensive loss ratio Earned premium Endow ment policy Facultative reinsurance Gross claim Gross written premium Group annuity Insurance penetration Insurance fraud Lapsed policy A primary insurer which transfers some of its insurance risk by ceding a proportion of its total written premium through a reinsurance contract. The sum of claims paid by an insurance company, and the change in the provision for outstanding claims, irrespective of whether or not they have been reported. Claims payable as a percentage of premium income. The sum of acquisition cost and administrative cost. The acquisition cost is the percentage of a premium produced that is retained as compensation by insurance agents and brokers. The ratio of claims incurred to net premium earned. The amount of money considered to have been earned on a policy by an insurer. It is cagbplated by multiplying the original premium by the percentage of the policy s term which has expired w ithout a claim being made. A scheme in which the term of the policy is defined for a specified period, such as 15, 25 or 30 years. The insurer pays the claim to the family of the assured in the event of the assured s death within the policy's term, or in the event of the assured surviving the policy's term. An arrangement for separate reinsurance for each risk that the primary insurer underwrites. The reinsurer can accept or reject any risk presented by the primary insurer seeking reinsurance. The amount payable by an insurance company before allowances are made for credits that may be due in the form of reinsurance, subrogation or salvage. The total amount of premiums (before deduction of reinsurance costs) customers are required to pay for insurance policies written during the year. A life insurance scheme providing annuities at retirement to a group of people under a single contract. It is usually taken out by an employer for the benefit of its employees. The percentage of total written premium to the country s GDP. Any act committed w ith the intent to obtain payment from an insurer through fraudulent means. A policy which is terminated due to the non-payment of the premium Life Insurance in the United Kingdom, Key Trends and Opportunities to 2017 Page 15

16 INTRODUCTION Table 1: Insurance Industry Definitions Term Definition Loss ratio Liability insurance Loss reserve Maturity claim Per capita premium Premium ceded Single-premium life insurance policy The ratio of total losses paid out, in the form of claims plus adjustment expenses divided by the total earned premium. A type of insurance that covers legal claims by third parties against the insured. The estimated amount of claims incurred but not yet settled. The payment made to a policyholder at the end of the stipulated term of a term life insurance policy. The ratio of the total written premium to the country s total population. The share of premiums transferred to a reinsurance company by a primary insurer. A life insurance scheme in w hich a lump sum is paid into the policy in return for an assured sum of money in the event of the policyholder s death. Term insurance A life insurance scheme that provides protection for a specified period, usually between five and 20 years. The policy expires without value if the insured survives the stated period. Treaty reinsurance Direct marketing E-commerce Agencies Insurance brokers Bancassurance Other distribution channels Source: Timetric analysis A reinsurance agreement applying to the reinsurance of a class or some classes of business, instead of an individual risk. Direct marketing channels for insurance policies include insurers sales forces, telemarketing, postal mail, , call centers and mobile phones. The distribution of insurance policies online through company or third-party websites. Individuals and corporate agencies which are licensed to sell insurance for one or more specific insurance companies Individuals or businesses which sell insurance policies. An insurance broker represents the insurance policyholder in insurance transactions, unlike an insurance agent, which represents the insurer. Insurance brokers also act as advisors to policyholders. The partnership between a bank and an insurer in which the insurer uses the bank s sales channel to sell insurance products. Other distribution channels in the insurance industry include post offices, convenience stores, multilevel marketing, and any channel other than those mentioned above. Timetric Life Insurance in the United Kingdom, Key Trends and Opportunities to 2017 Page 16

17 INTRODUCTION 2.3 Methodology All Timetric insurance reports are created by following a comprehensive, four -stage methodology. This includes market study, research, analysis and quality control. 1) Market Study A. Standardization Definitions are specified using recognized industry classifications. The same definition is used for every country. Annual average currency exchange rates are used for the latest completed year. These are then applied across both the historical and forecast data to remove exchange rate fluctuations. B. Internal audit Review of in-house databases to gather existing data: Historic market databases and reports Company database C. Trend monitoring Review of the latest insurance companies and industry trends 2) Research A. Source s Collection of the latest market-specific data from a wide variety of industry sources: Government statistics Industry associations Company filings International organizations Insurance regulatory agencies B. Expert opinion Collation of opinion taken from leading insurance industry experts Analysis of third-party opinion and forecasts: Broker reports Media Official government sources C. Data consolidation and verification Consolidation of data and opinion to create historical datasets Creation of models to benchmark data across sectors and regions 3) Analysis A. Market forecasts Feeding forecast data into market models: Macroeconomic indicators Industry-specific drivers Analysis of insurance industry database to identify trends: Latest insurance trends Key drivers of the insurance industry Life Insurance in the United Kingdom, Key Trends and Opportunities to 2017 Page 17