The life assurance protection gap for the UK
has increased by 20% from £2trn ($3.1trn) to £2.4trn over the past
ten years, according to Swiss Re.

In its report Term and Health Watch
2012, Swiss Re said on average, this gap amounts to around
£100,000 per person, with the amount of under-insurance greatest
among single parents, couples with children and those aged 35 and
under.

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The report said:

  • New term assurance sales fell from 
    1.54m policies in 2010 to 1.48m in 2011, which is a fall of
    3.4%

 

  • Income protection sales decreased from
    110,743 policies in 2010 to 110,472 policies in 2011 a drop of
    0.2%.

 

  • The number of critical illness policies rose
    from 534,561 in 2010 to 551,382 in 2011, an increase of 3.1%.

 

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Russell Higginbotham, Swiss Re’s UK CEO, said
under-insurance in both the life insurance and income protection
areas is proving to be a long-term problem in the UK.

Higginbotham said: “The industry is faced with
the challenge of better communicating to consumers how to alleviate
the financial burden placed on families and dependents in difficult
times.

“Simple life assurance cover is not expensive;
for example, a healthy 35-year-old male non-smoker would only pay
around £2 per week for £100,000 of life cover to age 65.”

Looking forward, the report includes an
opinion survey of product providers and opinion formers.

This shows optimism for 2012, with the hope
that new regulation such as the Retail Distribution Review will
stimulate interest in protection.

The report also cites a call for clearer
communication between the government and consumers, as welfare
reform bites and the need for protection increases.

Higginbotham said: “We are about to see a
period of unprecedented change which includes a greater need for
self-responsibility. Whatever distribution market and models
emerge, insurers, employers and regulators need clear and
unequivocal statements showing how consumers can move beyond a
greater awareness of the direction of change to getting something
done.”