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Life insurance market review 2024 – What’s happening?

The life insurance market is constantly evolving and like every other industry there’s some good and some bad. Our team of life insurance experts are constantly reviewing the market so that we can tell you about what’s happening and how it might impact you and your family.

In this review we’ll look at the past 12 months in the life insurance industry to explain and provide a summary on what it means to you. Things are always changing in the life insurance market, but 2023 was an exception with more happening than we’ve seen in decades.

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60-Second Summary – Life insurance market review 2024

Looking back at the past 12 months in life insurance, there has been more change than we’ve seen in decades and possibly more impact on consumers than ever before. Life insurance continues to be the foundation for any financial planning for your family, so it’s important to understand what the landscape now looks like.

  • Canada Life was the first of several major life insurance brands to close its doors to new business in January 2023, meaning the loss of hundreds of jobs.
  • April 2023 saw the announcement that Aegon UK Life Insurance business would close and that it would sell its protection to Royal London.
  • AIG Life Limited sells its life business to Aviva PLC. in the biggest announcement of the year in September 2023.
  • Bluezone Insurance launches a tech based proposition focused on offering bespoke life insurance for people with Type 2 Diabetes in June 2023.
  • Several insurers, including Vitality, HSBC and Legal & General, launches upgrades to its products and several new propositions.

Life insurance (also known as Term Assurance) is a monthly renewable insurance policy that pays out a lump sum to your loved ones upon the death of the policyholder. Traditional life insurance policies are designed to protect your family financially if you die and benefits are typically used for:

  • Mortgage protection: clear your mortgage balance and any other debts secured against your property.
  • Debts and loads: payouts can also be used to clear any major debts or finance agreements that can no longer be paid by lost income.
  • Child costs (e.g. school fees, university, legacy planning etc.): some people use life insurance to plan for their children’s future if they passed away.
  • Business debts: business owners might want to think about life insurance to protect their business assets and shares if they died.
  • Bills and cost of living: standard costs of running your home and making sure that your family can continue with their lifestyle.

Life insurance pays out a cash lump sum in the event of the death of the person insured under the policy terms. Benefit payments are usually tax-free and can be used for any purpose as it is not tied to a specific debt or agreement (unless it is written in a Trust or has a specific legal agreement).

Nobody actually needs life insurance, but as it is strongly recommended by many financial experts including Martin Lewis, ‘anyone with financial dependents should have life insurance’.

What is a financial dependent?

The following are classed as ‘financial dependents’ and therefore would require some financial security if you died:

  • Children: any child who is in full-time education or who is not totally financially independent.
  • Partner or spouse: if you live with a partner or spouse who shares a financial responsibility for running your property or who relies on your income.
  • Dependent parent: a parent who is reliant on your support, care, or financially dependent on you.
  • Co-habiting or joint mortgage: more and more people are sharing mortgages  and renting homes outside traditional relationships (e.g. friends or colleagues) to be able to buy or rent a property.

If you have children or someone who is financially dependent on the income that you provide (e.g. partner, parent who is in care, relatives etc.), then you should have life insurance. Most life insurance policies can be used in any way you need to provide financial protection to your loved ones or a business.

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If you don’t have a partner, family, financial dependents, or a business, then it is unlikely that you would need a life insurance policy. This usually applies to young adults who are only just starting out and have not yet established a family or relationship.

You might also be in a very fortunate position where you have a significant amount of savings or cash reserves (e.g. inheritance, business assets, cash rich etc.), which can provide you and your family with a sufficient level of financial protection if you passed away.

Life insurance is medically underwritten and each insurance provider has their own pricing structure that is designed to suit a specific demographic or group of people. Less insurance providers means that consumers have less choice and that they will be limited to a smaller pool of insurance options.

Also, more life insurance providers means that there is likely to be more niche options for customers with specialist needs (e.g. pre-existing medical conditions, dangerous occupations and extreme sports). Fewer insurers will usually mean that less of these non-standard or specialist policies will be available to consumers.

Areas of life cover no longer available:

These are some of the specialisms that we know of that have been removed from the life insurance market in recent years, and currently still not available.

We saw an unprecedented number of life insurance providers close their doors or consolidate their position in the market in 2023. The trend also appears to have continued early in 2024, with the announcements of two major guaranteed life insurance providers now closing its doors.

In 2023, we saw the following losses to the UK life insurance market:

Canada Life logo

Canada Life closed its doors to new business for personal lines life insurance in the UK due to a lack of demand and poor performance. Even though Canada Life was not classed as one of the top life companies in the UK, it was still a significant loss and left some major holes in the life insurance market.

Aegon logo

Aegon announced in April 2023 that it would be selling its life insurance book of 400,000 policyholders to Royal London, and that it would be closing its doors to new customers. This was a massive loss to the UK life insurance market and significant job losses within its personal protection area of the business.

AIG logo

AIG Life to merge with Aviva PLC. was announced in September 2023 which was one of the biggest mergers in the history of the UK life insurance industry. The merger sees two of the giants of the life insurance market to join and become a single entity in 2024 (pending FCA approval).

The exit of these 3 major brands from the UK life insurance market, as well as several others prior to these, it does beg the question of ‘what is happening to the UK life insurance industry?’. Over the past several years, we’ve also seen several other major closures or mergers and very little in the way of newcomers.

Previous life insurance company closures:

As you can see, closures and mergers of major insurance brands in the UK have been every 5 or so years up to 2023. We’ve now seen an unprecedented number of examples where life insurance providers have exited the market in a very short period of time.

We’re now left with a smaller pool of life insurance providers in the UK and especially bigger brands that are well established. It has been decades since we’ve seen any major newcomers to our life insurance industry.

The last big brand to launch in the UK was Beagle Street in 2012 which was one of several digital life insurance brands to launch under the BGL Group (including Virgin Money and Budget Insurance). prior to that, Vitality Life & Health launched in the UK in 2004 under the PruProtect brand and is now one of the top 3 life insurance brands in the UK.

More recently, we’ve seen several smaller and more specialist life insurance brands:

  • DeadHappy launched its provocative new life insurance brand in 2013 (part of Shepherds Friendly).
  • The Exeter launched its new specialist medical life insurance proposition in the UK in 2017 following the closure of Partnership in 2015.

Over the past two decades, we’ve seen more consolidation in the UK life insurance market than ever before and far fewer new entrants. This now leaves British households with less choice than we have seen in years and no real signs on the horizon of any major new offerings.

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If your life insurance company goes bust then you should usually be notified by email of the closure and your policy should be protected. In the past where there have been life insurance company closures, the book of policies has been bought by other providers.

All life insurance policies in the UK are covered by the Financial Services Compensation Scheme (FSCS) and you will be protected in this event.

Financial Services Compensation Scheme Logo

About the Financial Services Compensation Scheme (FSCS)

The Financial Services Compensation Scheme protects all life insurance policies in the UK and can be relied on if your insurance company goes bust. If your insurer can no longer fullfill their financial obligations to pay out on valid claims, the FSCS will step in to award compensation.

Telephone – 0800 678 1100 (Monday to Friday, 9am – 5pm)

Email – Emails can be submitted through the Contact Us page

Post – Financial Services Compensation Scheme, PO Box 300, Mitcheldean, GL17 1DY

We’ve talked about the negative impacts and some issues that might cause issues with your choice or the cost of life insurance in the UK, so let’s look at what’s new. There have also been several developments in the UK life insurance market in 2023 which have given us some good news for British households and businesses.

Bluezone logo

Bluezone launched in June 2023 as a small insuretech brand which is dedicated to providing life insurance to people with Type 2 Diabetes.

Royal London logo

Royal London upgraded its critical illness cover in December 2023 with an increase of conditions covered to 48 with 100% payout and partial payout increase to £35,000.

HSBC logo

HSBC Life announced in September 2023 that it would offer critical illness insurance to people with Type 2 Diabetes.

Aviva logo

Aviva launched its new ‘Cost of Living’ scheme in March 2023 to help support people affected by the cost of living crisis.

Bluezone logo

Guardian launches its new income protection insurance proposition in March 2023 to expand its current range of life insurance products.

This at least shows that there are still several new innovations coming to the UK life insurance market in 2023. Unfortunately, we still feel that the amount of losses and consolidation has far outweighed the exciting new developments.

Still, the best way to find the cheapest and most suitable life insurance policies in the UK is to speak to an expert or specialist. Most people in Britain still buy life insurance through a life insurance broker, mortgage advisor or an independent financial advisor.

The number of people buying life insurance online has increased by a small percentage in recent years, but this is still fairly insignificant compared to those seeking expert advice. Martin Lewis who is a leading financial journalist and peoples champion, also strongly recommends getting proper advice and making sure that you have enough life insurance to protect your family.

You can speak to one of our friendly team of life insurance experts by calling 0800 009 6559, chat to us on WhatsApp or CLICK HERE to get advice.

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Is it worth paying for life insurance?

Yes, if you’ve got children or financial dependents then you should have life insurance to protect them if you die. Martin Lewis and the Financial Conduct Authority recommend that you take out life insurance to protect your family and your home. Generally, life insurance premiums start from as little as £5 per month and will be cheaper for younger adults.

Common myths about life insurance:

  • Life insurance won’t pay out (pays out 98% of claims)
  • People with medical conditions can’t have life insurance
  • Life insurance is expensive
  • Savings can be just as effective as life insurance
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What is the average cost of life insurance per month?

Based on recent research carried out, the average cost of life insurance is approximately £38 per month and the average level of cover is £152,000. Life insurance premiums also vary dramatically from one insurance provider to another and you can reduce your monthly premiums by shopping around.

Fundamentally, life insurance premiums vary depending on your age, health and the amount of cover that you need, starting from as little as £5 per month. You can also get life insurance to protect your family and your home against financial loss if you die.

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Average cost of life insurance - iam|INSURED

What does life insurance cover you for?

Life insurance is a monthly renewable ‘term insurance’ contract that pays out a cash lump sum or regular payments on death to your family or beneficiaries. Policies are most commonly used for family protection or mortgage protection for your loved ones if you die and your household income reduces, plus the additional issues of losing a parent or carer.

Traditional life insurance will not exclude any pre-existing medical conditions and will cover suicide after 12 or 24 months. You can also use life insurance for business protection purposes as well as tax-efficient business life insurance for directors or key people.

What are the disadvantages of life insurance?

The biggest and most common problem that consumers have with life insurance is the cost and the monthly premiums. This is the top reason for policy cancellations and why more people don’t take out life insurance to protect their family.

Another key disadvantage with life insurance is that it holds no investment value, nor can you cash it in. Life insurance works like any other traditional general insurance policy (e.g. car insurance, house insurance, pet insurance etc.), you pay a monthly premium and it will pay out in the event of a claim. Some people decide to use savings instead of taking out life insurance but you need to make sure that you have sufficient savings to cover the costs of death for your family.

Why do I need life insurance?

The fact is that nobody actually ‘needs’ life insurance, but it is strongly recommended that families and couples have cover to protect their loved ones in the event of death. Martin Lewis recommends life insurance and says “this is something that every parent, partner, or person with any other type of dependent needs to consider”.

Life insurance financially protects your loved ones if you die and pays out a cash lump sum to repay your mortgage, pay for school fees, replace lost income, and pay for regular outgoings. Mortgage life insurance is not linked to your mortgage debt so you can use it to pay off some or all of your mortgage.

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