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The last year has been a difficult one for life insurers in the United Kingdom and Europe, for although they had limited exposure to US subprime mortgagees, the secondary effects have been severe. The economic crisis brings declining demand for life insurance products along with an increasing lapse rate as personal disposable income comes under pressure. Underwriting profits are put under further pressure with poor performing stock markets. New products such as variable annuities remain under pressure because of the decline in assets under management and the increased costs in hedging. Declining asset value along with decreased interest rates have also increased the costs of providing guarantees for “with-profit” business. Here, Catherine Stagg-Macey, a senior analyst in insurance practice of IT research and advisory firm, Celent (a division of the Oliver Wyman Group) considers the drivers in the UK life insurance market that will impact the nature of the market in the future. These include the changing demographics (including the growing ageing population bulge which is likely to force insurers to look at new products and services for this underserved group), the changes that will be brought about by the Financial Services Authority’s Retail Distribution Review including the introduction of professional standards for advisors, commission and fees, and a guided advice process. There is no doubt that the traditional role of the insurer is being challenged and indeed, many insurers are moving into the role of distributor. In this regard, Ms Stagg-Macey comments on the growing importance of the direct channel as a result of the increased willingness of consumes, supported by changes to regulation, to buy online.
Like many other Western countries, the United Kingdom has an ageing population and forecasts project that in 30 years time,
the 50+ age segment will be the only growing segment, potentially exceeding 40% of the total population. This ageing bulge
of the demographic means that there will be a shift in attention from preretirement accumulation for individuals to postretirement
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