The protection industry has made progress in communicating with consumers but more needs to be done and now maybe the time for product innovation, Swiss Re has said.
While a survey conducted by the reinsurer revealed there is still much uncertainty in the market although opinions are becoming more positive about future prospects.
Reflecting on results from the review of market representatives for its annual Term and Health Watch report, Ron Wheatcroft, technical manager for Swiss Re in the UK and Ireland, discussed some of the challenges and opportunities facing the sector.
"Despite a challenging environment, new retail protection sales figures held up well in 2010," he said.
"However, 2011 will be another difficult year but reductions in welfare spending over the next few years could provide great opportunities for the insurance market in the longer term.
"In the meantime, it will be important to keep getting out simple and unambiguous messages about the need for people to purchase protection. The industry has made progress in communicating with consumers but more needs to be done," he added.
The reinsurer's survey found that 43 of the 50 respondents (86%) thought the overall protection market would either remain level (20, 40%) or increase (23, 46%) over the next year.
Just seven (14%) predicted the market would shrink instead.
The positive feeling continued with income protection (IP), where 39 (78%) of replies predicted a growing (24, 48%) or static (15, 30%) market in the next 12 months, with a slightly larger minority, (11, 22%) feeling things would get worse.
However, the future for the CI market appeared more mixed with 20 (40%) predicting it would remain similar to present, 13 (26%) a decrease and 16 (32%) an increase.
Wheatcroft summarised the comments received from the survey, particularly regarding welfare reforms, suggesting that: "It would be easy to dismiss further calls for innovation in IP, yet a strong view emerged that now is the right time to move on from talking and instead deliver consumer-friendly products.
"We have a very clear steer from government that consumers will need to provide for themselves and this should present opportunities.
"These would be through retail products and employer-sponsored arrangements or hybrid initiatives, such as flexible benefit or voluntary schemes to provide or top up other arrangements."
And Wheatcroft also indicated that the issue of government involvement and cooperation in the market was of interest to most protagonists.
"In the absence of compulsion by government, incentives to purchase protection policies were seen as attractive, although it was recognised that this could unleash an exercise in rebroking existing cover rather than stimulating market growth," he said.
"There can be little doubt that this government sees the private sector as key while the role of the state reduces, whether in the areas of saving, work-related income, family protection or social care.
"We need to accept, however, that further government funding, at least in the short term, will be limited if non-existent," he added.
