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The protection market needs innovation - not consolidation

Published: 12/10/2023

With the life insurance market showing signs of consolidation, protection product development and competition through continued innovation has never been more vital, writes VitalityLife Managing Director Justin Taurog.

Given that more than one major insurer has exited the protection market in 20231, it’s natural that advisers are concerned about competition levels within the life insurance industry today.

Alongside this, recent months have seen consumers caught between rising interest rates and continued high prices, with energy costs expected to rise again as we enter the winter months2.

Against this backdrop, we believe that commitment to the intermediated health and protection market - through continued product innovation - has never been more important.

A shifting landscape

Since we entered UK life insurance in 2007, the protection landscape has fundamentally shifted. This has been driven by changing consumer needs and attitudes. Regulatory expectations changed most recently with Consumer Duty and we’ve seen the need for protection advice continue to grow in recent years.

However, a significant protection gap still persists in the UK3. Tackling this and addressing the wider challenges our country faces, requires forward-thinking solutions that match both the needs of today’s consumer and advisers.

At Vitality, our intention has always been to reinvent protection insurance and deliver genuine product innovations to move the industry forward. I was particularly proud earlier in the year to hear CIExpert founder Alan Lakey describe how our Serious Illness Cover had "served to ignite the market" when first launched. However, we haven’t stopped there.

Committing to the future of protection

While others have withdrawn, 2023 has been a year in which we’re proud to re-affirm our long-term commitment to the UK life insurance market, through a number of major launches and initiatives.

At our Life Launch event in February, we laid out our latest vision for the next generation of insurance, when we unveiled a suite of new protection products designed in response to the trends shaping our world and the needs of advisers.

Our Serious Illness Cover, for example, provides unparalleled long-term coverage that allows for multiple claims and severity-based payments. Our Income Protection plan, meanwhile, delivers far greater flexibility alongside more certainty around earnings guarantee, as well as boosted payouts to promote preventative lifestyle choices to help keep people healthy in the workplace.

The uniqueness of Dementia and FrailCare Cover is another example of us responding to a changing society, with a social care crisis looming and new product solutions needed. To date, we’ve insured 70,000 members through this cover4, but with this product feature now embedded within our plans, we see this only as the start.

Shared Value not just added-value

Consumers are also increasingly looking for unique, meaningful experience-based purchases5 that offer regular opportunities for on-demand engagement and deliver more immediate value.

On one hand, there’s a growing emphasis on the need for advisers to consider more than just product premium when producing recommendations - something reinforced recently with the focus of Consumer Duty on 'good client outcomes' and 'avoiding foreseeable harm'.

However, in a market where most products remain largely commoditised, there’s a risk we drift out of sync with both the regulator, and the demands and expectations of consumers.

In recent years, we’ve seen an increasing focus in the industry on ‘added-value’, arguably an area that has also become commoditised. Clients are offered various non-contractual bolt-ons of varying value and often in a disjointed way, with often poor signposting, offering very low opportunity for engagement.

By contrast, we see our unique share-value model as a key differentiator in this context, delivering ‘fair value’ to consumers and resonating with the market as a result. Based on the simple insight that incentivising positive behaviour can deliver economic and health benefits that are good for clients, good for the industry and good for society.

In June, we joined the United Nations Principles for Sustainable Insurance Initiative6 to take this a step further. By bringing together a global network of financial services organisations, its aim is to help the insurance industry reduce environmental, social and governance (ESG) risks to ultimately create a more sustainable future from a health perspective.

Evidence it works

We now insure over 1.7 million lives. Our strong financial performance (as seen by our recent A-rating from Fitch7) is another example of our established market stability as a provider, helping us to ensure we’re there for your clients at the moments that matter.

Our most recent VitalityLife Claims and Benefits report helps show what we do in action. Beyond the headline numbers – more than £96m paid in claims and an average of 96% of all claims paid across our protection suite - it’s the myriad of other statistics and examples that, I believe, reinforce our commitment to delivering the best possible outcomes in the market.

Whether it’s the 1 in 8 unique Serious Illness Cover claims we paid, or the 1 in 12 who were claiming for their second or third time – something our Chief Operations and Growth Officer Greg Levine explores in his latest video – or the £100m we’ve returned to life and health members alone through rewards in 20228.

It’s also the exceptional levels of member engagement and retention stats that help to deliver more profitable and reliable business, represented by the fact our most engaged members are 39% less likely to cancel their plan. Alongside 41% lower mortality rates for our most active members.

It’s obvious that we’re never standing still at Vitality. Instead of resting on our laurels in the market, we’re just as committed as ever to moving the market forward and supporting advisers to grow their business over the long-term. Every step of the way.

Why protection needs to evolve in line with the changing needs of people today

Our Chief Operations and Growth Officer at Vitality, Greg Levine, explores why protection needs to evolve in line with the changing needs of people today.
Watch on YouTube

Where to next?

  • Why better client engagement is good for everyone

    Next in our Catalysing behaviour change series, Lara Fascione, Vitality Group Retention & Adviser Operations Director explores how harnessing the power of engagement can deliver benefits for clients and advisers alike.

  • Protection must evolve to meet changing customer needs

    The advent of the new Consumer Duty regulations means that protection products must evolve to meet changing consumer needs and deliver good outcomes, writes Justin Taurog, Managing Director VitalityLife.

  • Insights Hub

    Our Insights Hub brings you our range of adviser content - from video series to articles blogs.