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Creditor Insurance in the UK

  • June 2014
  • -
  • Finaccord
  • -
  • 25 pages

Finaccord’s report titled Creditor Insurance in the UK offers uniquely detailed insights into the market for creditor insurance, sometimes also referred to as payment protection insurance or loan-related insurance, as acquired by individual borrowers in the UK. Drawing on the results of a survey of over 100 lending institutions, the study analyses the distribution of creditor insurance by banks and other lending institutions, how provision rates vary for different lending products, operating models used for arranging creditor insurance, and distribution partnerships weighted by the size of distributors. The PartnerBASE™ dataset that accompanies the report details each of close to 60 creditor insurance distribution deals traced by Finaccord. In short, this study will provide you with the definitive guide to current and future opportunities in creditor insurance in the UK.

Key features of this study and the PartnerBASE™ dataset and market data annexe that accompany it include:

- quantification of creditor insurance market size and growth with a timeline from 2009 to 2013 and onwards to 2017: how much is this market really worth in the UK and what is its future development potential?

- segmentation of this market both by underlying loan type (differentiating between mortgages, point-of-sale automotive finance, other consumer finance and credit card loans) and by type of cover (differentiating between cover for death / permanent disability and temporary incapacity / unemployment);

- consideration of operating models used for creditor insurance: how advanced is the use of captive and joint venture underwriters by lending institutions in the UK?

- calculation of weighted provider share of partnerships: Finaccord’s unique quantitative analysis helps to identify which underwriters of creditor insurance hold the relationships that offer the most potential;

- investigation into alternative distribution channels for selling creditor insurance: a number of factors could increase the potential for entities other than the lending institutions themselves to sell creditor insurance in the UK.

Table Of Contents

Creditor Insurance in the UK
Table of Contents

Executive Summary

Introduction

Market Analysis

List of Graphics / Tables



0.0 EXECUTIVE SUMMARY

1.0 INTRODUCTION

What is this report about?

This report provides a comprehensive analysis of loan-related insurance policies in the UK

Rationale

Mortgage-related life insurance is still available via providers of home loans in the UK...

... although other types of creditor insurance are no longer sold by lending institutions

Methodology

Survey of banks and other lending institutions

Market data

Definitions

Creditor insurance

Mortgages, consumer finance and credit cards

Weighted provider share of partnerships

Operating models

Abbreviations and exchange rates

PartnerBASEâ„¢ and market data annexe

Finaccord



2.0 MARKET ANALYSIS

Banks and other lending institutions covered

Introduction to the banking sector



The UK retail banking sector has seen significant changes in recent years...

…affecting major players such as RBS and Lloyds Banking Group...

…plus the Co-operative Bank...

... and a number of small and medium-sized building societies

Consumer lending market size and growth

Mortgage lending

Mortgage balances outstanding edged up in nominal terms between 2009 and 2013…

Non-mortgage lending

…but the value of total non-mortgage consumer lending has fallen back quite substantially

Credit and other pay later cards

Following a contraction, the number of credit cards in circulation has started to rise again since 2011

Creditor insurance provision rates, operating models and partnerships

Creditor insurance linked to mortgages

The majority of significant mortgage lenders in the UK offer related creditor insurance

Legal and General is ranked first by weighted share of partnerships…

…followed by Aviva, which benefits from three key distribution partnerships

Scottish Widows and HSBC Life are the only two captive underwriters in this arena

CUNA Mutual, Friends Life, LV=, and Standard Life are also visible as insurers in this field

Seven mortgage lenders employ captive or external financial advisers for mortgage term life insurance...

... but 25 have no arrangement at all for mortgage-related creditor insurance

Creditor insurance linked to consumer finance and credit cards

Creditor insurance risk coverage

All policies offer the potential for covering death and permanent disability…

…with temporary incapacity and unemployment increasingly covered via separate policies

Alternative distribution channels

Three major life insurers offer mortgage-related creditor insurance directly to consumers...

…and mortgage brokers and financial advisers are major distributors of mortgage term life insurance...

... while online aggregators and brokers sell ‘accident, sickness and unemployment' cover

Any borrowers looking for 'traditional' payment protection cover must buy from specialised intermediaries

Consumer research shows that most mortgage life insurance is not bought from the lenders themselves

Creditor insurance market size, growth and forecast

The market is now almost entirely composed of mortgage-related life insurance...

... a sector whose value is predicted to expand between 2013 and 2017

Citizens Advice filed its original ‘super-complaint' as long ago as September 2005...

... on the basis of at least five concerns

Lending institutions began to withdraw from the payment protection market from 2007 onwards...

... and have already paid refunds and compensation to customers in the region of GBP 14 billion






LIST OF GRAPHICS / TABLES


TABLE OF CONTENTS

0.0 EXECUTIVE SUMMARY

Creditor insurance gross written premiums in the UK, segmented by policy and cover type, 2009, 2013 and 2017

1.0 INTRODUCTION

Banks and other lending institutions in the UK contacted by Finaccord, segmented by type

2.0 MARKET ANALYSIS

Residential mortgage lending balances outstanding in the UK (absolute and per capita), 2009 to 2013

Consumer non-mortgage lending balances outstanding in the UK (absolute and per capita), 2009 to 2013

Credit and other pay later cards issued and per capita in the UK, 2009 to 2013

Key data points for the consumer lending market in the UK, 2009 to 2013

Provision of creditor insurance linked to mortgages in the UK, 2014: provision rate, operating models and weighted provider share of partnerships

Provision of creditor insurance linked to consumer finance in the UK, 2014: provision rate, operating models and weighted provider share of partnerships

Provision of creditor insurance linked to credit cards in the UK, 2014: provision rate, operating models and weighted provider share of partnerships

Risk coverage of creditor insurance policies in the UK, segmented by type of underlying product, 2014

Creditor insurance gross written premiums in the UK, segmented by policy type, 2009, 2013 and 2017

Creditor insurance gross written premiums in the UK, segmented by cover type, 2009, 2013 and 2017

Creditor insurance gross written premiums in the UK, segmented by policy and cover type, 2009, 2013 and 2017

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ref:plp2014

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