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UK Distribution Landscape Overview 2006Product Type: Market Research ReportPublished by: Datamonitor Published: January 2007 Product Code: R313-19373 Description IntroductionScope Highlights Reasons to Purchase Table of Contents TABLE OF CONTENTS
EXECUTIVE SUMMARY 3
Distribution Landscape 3
Snapshot of distribution channels 3
Provider landscape 4
Distribution Trends and issues 4
The Future Decoded 5
CHAPTER 1 UK DISTRIBUTION LANDSCAPE PRODUCT SUITE 19
UK Distribution Overview 2006 19
UK IFAs 2006 20
UK Bancassurance 2006 20
CHAPTER 2 INTRODUCTION AND METHODOLOGY 22
Scope of the report 22
Data 22
Report structure 23
CHAPTER 3 DISTRIBUTION LANDSCAPE 24
Introduction 24
Key findings 24
Channel definitions for the distribution of life and pensions products, 2006 onwards 25
IFAs still dominate the life and pensions distribution market in the UK but bancassurers have gained market share 27
Pensions account for 58% of IFA sales in the total life and pensions market in 2005 28
The single and regular premium pensions markets continue to show positive growth, reflected in increased sales through IFAs 29
Personal pensions accounted for almost half of total IFA single premium pensions business in 2005 30
IFAs have almost quadrupled sales of SIPPs since 2004 30
Group personal pensions account for 56% of IFAs’ regular premium pensions new business 31
Single premium sales dominate the life market, but bancassurancers have overtaken IFAs in regular premium sales 32
Unit linked bonds remain the leading product in IFAs’ single premium sales as with-profits bonds continue to decline 33
Term assurance accounts for more than three quarters of regular premium sales through IFAs 34
Unit trusts and OEICs sold by IFAs 36
Unit Trust and OEIC sales are vital to IFA business 36
IFAs now account for over three quarters of unit trust and OEIC sales in the UK 38
Life products account for 84% of bancassurance sales in the total life and pensions market in 2005 39
Bancassurers have seen more growth in single premium life than regular premium life sales in the last two years 40
Unit-linked bonds and ditribution bonds sales via bancassurance have risen in 2005 41
Contrary to market trends and expectations, bancassurers have significantly increased sales of mortgage related products in 2005 42
Bancassurers are selling more regular premium pensions than single premium pensions 43
Stakeholder pensions remain by far the most popular form of regular premium pension in bancassurance 44
Single-tie distribution is on a decline while non-intermediated sales have shown moderate growth over the last five years 46
Regular premium life is the most important product category for the non-intermediated distribution channel 47
Single premium pensions are the only product category where the single-tie distribution channel has experienced growth 48
The non-intermediated distribution channel has experienced slight growth in sales of regular premium pensions in the last five years 49
Data Tables 50
CHAPTER 4 SNAPSHOT OF DISTRIBUTION CHANNELS 58
Introduction 58
Key findings 58
The UK IFA market is comprised of a varied mix of small, medium and large sized firms 59
The total number of IFA firms in the UK has increased since 2005 59
The number of network member firms has declined by almost 20% since 2003 60
Total IFA firm turnover increased by 9.6% between 2005 and 2006 61
Sesame has recovered the ground it lost in 2005, and retained its position as the largest UK IFA network 63
The top 20 IFAs have increased their market share, but still account for less than a third of total turnover 64
The largest bank is not automatically the largest bancassurer 65
Barclays is the bank with the largest branch network in the UK but it’s not the largest bancassurer 65
HBOS is the dominant player in the UK bancassurance market 67
Life and Pension advertising expenditure in bancassurance 68
Non-traditional distributors originate from various industries 69
From ASDA to Virgin - all want a share of the UK financial market 69
Retailers have continually widened their financial services offering 70
Life and Pension advertising expenditure in non-traditional distribution 74
Data Tables 76
CHAPTER 5 PROVIDER LANDSCAPE 79
Introduction 79
Key findings 79
The life and pensions market in the UK is highly competitive 80
Depolarisation has led to a diversification of distribution channels 80
Norwich Union has the strongest market share position in the UK 81
In 2005 life insurers spent more than GBP40m on advertising 82
HBOS recorded highest sales of single premium life products in 2005 84
Legal & General recorded highest sales of regular premium life products in 2005 85
Aviva recorded highest sales of single premium pension products in 2005 86
Standard Life recorded highest sales of regular premium pension products in 2005 87
An increasing number of providers offers products online 88
Data Tables 89
CHAPTER 6 DISTRIBUTION TRENDS AND ISSUES 95
Introduction 95
Key findings 95
Depolarization has not had the effect originally anticipated 96
IFAs do not see a radical shift following depolarization and remain confident 96
Depolarization may benefit the bancassurers on the longer term 97
Most non-traditional distributors offer products from one provider 97
Providers seek to expand and diversify their distribution strategies 98
FSA sets out priorities for its review of UK retail distribution 100
The FSA wants to be the catalyst for change in retail distribution 101
IFAs prepare to defend their business model 101
FSA pulls new products under its control 101
Non-traditional distributors struggle, with varying success 102
In non-traditional distribution the customer initiates the purchase 103
Some experts question the suitability of non-traditional distributors 103
Providers seek to explore the potential of worksite marketing 104
Despite promising potential, opinions among experts are divided 105
CHAPTER 7 THE FUTURE DECODED 107
Introduction 107
Key findings 107
IFAs will remain the dominant life and pensions distribution channel in the UK 108
Multi-tie distribution will see strong single premium pensions sales 109
The regular premium life market will decline in the next five years 110
SIPPs are expected to drive IFAs’ single premium pensions sales 111
IFAs account for the vast majority of regular premium pensions sales 112
Data tables 113
APPENDIX 118
Definitions 118
Single premium policy 118
Regular premium 118
New business 118
Wrap accounts 118
Life based savings products 119
Life Product Definitions 119
Single Premium Life 119
Annual Premium Life 121
Pension product definitions 123
ABI definitions of distribution channels 124
Matrix-Data 125
Notes to IFA Firm categorizations 127
Forecasting methodology 128
Regression analysis is unsuitable for Life and Pensions forecasting 128
Datamonitor uses a qualitative forecasting methodology for Life and Pensions 128
Further reading 130
Savings and Investments SPP 130
Life and Pensions SPP 130
Financial Advice Market SPP 131
SPP writing team 132
LIST OF TABLES
Table 1: Total UK life and pensions sales by segment, 2000-2005 37
Table 2: Total UK IFA life and pensions sales by segment, 2000-2005 37
Table 3: Total life and pensions market segmented by distribution channel, 2001-2005 50
Table 4: Total life and pensions sold through the IFA channel, 2000-2005 51
Table 5: Sales of life new business premiums through the IFA channel, segmented by single and regular premium, 2000-2005 51
Table 6: Sales of pensions new business premiums through the IFA channel, segmented by single and annual premium, 2000-2005 52
Table 7: Sales of life new business single premiums through the IFA channel, segmented by product type, 2004-2005 52
Table 8: Sales of life new business regular premiums through the IFA channel, segmented by product type, 2004-2005 53
Table 9: Sales of pensions new business single premiums through the IFA channel, segmented by product type, 2004-2005 53
Table 10: Sales of pensions new business regular premiums through the IFA channel, segmented by product type, 2004-2005 54
Table 11: Total gross retail sales of unit trusts and OEIC products, 2004-2005 54
Table 12: Total life and total pensions business sold through the bancassurance channel 2001-2005 55
Table 13: Sales of life products through the bancassurance channel 2001-2005 55
Table 14: Single premium life product sales through the bancassurance channel segmented by product type 2004 - 2005 56
Table 15: Regular premium life product sales through the bancassurance channel segmented by product type 2004 - 2005 56
Table 16: Sales of pension products through the bancassurance channel 2001 - 2005 56
Table 17: Regular premium pensions product sales segmented by product type 2004 - 2005 57
Table 18: Single premium pensions product sales segmented by product type 2004-2005 57
Table 19: Network members by number and by turnover, 2002-2006 61
Table 20: Distribution status of top banks and building societies, 2006 66
Table 21: Life and Pension advertising expenditure in bancassurance 2005 68
Table 22: Life insurance and savings products offered by Tesco 71
Table 23: Life insurance and savings products offered by Sainsbury’s 71
Table 24: Life insurance and savings products offered by the Post Office 72
Table 25: Selection of other non-traditional players in financial services 73
Table 26: Life and Pension advertising expenditure in non-traditional distribution 2005 75
Table 27: Total number of IFA firms in the UK segmented by type, 2005-2006 76
Table 28: Gross annual turnover of IFA firms segmented by type, 2005-2006 77
Table 29: Average annual turnover per IFA firm, 2005-2006 77
Table 30: Top 20 IFA firms (including networks) by turnover, August 2005 to July 2006 78
Table 31: Life and Pension advertising expenditure of UK insurers 2005 82
Table 32: Major UK insurance companies’ online product offer 2006 88
Table 33: UK Top 5 providers’ new business sales of life and pensions products 2005, GBPm APE 89
Table 34: New business sales of single premium life products 2005, GBPm APE 90
Table 35: New business sales of regular premium life products 2005, GBPm APE 91
Table 36: New business sales of single premium pension products 2005, GBPm APE 92
Table 37: New business sales of regular premium pension products 2005, GBPm APE 93
Table 38: UK Life and Pension advertising expenditure, 2001-2005, GBPm 94
Table 39: Total life and pensions market segmented by distribution channel, 2006f-2010f 113
Table 40: Single premium life market segmented by distribution channel, 2006f-2010f 114
Table 41: Regular premium life market segmented by distribution channel, 2006f-2010f 115
Table 42: Single premium pension market segmented by distribution channel, 2006f-2010f 116
Table 43: Regular premium pension market segmented by distribution channel, 2006f-2010f 117
LIST OF FIGURES
Figure 1: Bundling structure of UK Distribution Landscape 2006 19
Figure 2: Report structure of the UK Distribution Landscape 2006 report 23
Figure 3: IFAs are still the most dominant players but banks catch up 27
Figure 4: Pensions have been the dominant product in the total life and pensions market since 2001 28
Figure 5: The value of single premium pension sales through the IFA channel has grown by 12% since 2004 29
Figure 6: Personal pensions account for 44% of total single premium pensions new business sold through the IFA channel in 2005 30
Figure 7: Group personal pensions accounted for 56% of total regular premium pensions new business income sold through the IFA channel in 2005 32
Figure 8: Single premium life business has continued to see strong growth since 2004 33
Figure 9: Unit-linked bonds now account for over 80% of total single premium life sales 34
Figure 10: Term assurance accounts for over 75% of regular premium life sales through IFAs 35
Figure 11: Unit trust/OEICs account for around 60% of total IFA life and pensions sales 36
Figure 12: IFAs have handled over 60% of unit trust and OEIC sales since 2001 38
Figure 13: Sales of life products show strong recovery while pensions business is stagnating 39
Figure 14: Bancassurance did not suffer as badly as other distribution channels between 2002 and 2003 40
Figure 15: Bancassurers saw more growth in single premium life than regular premium life business in recent years 41
Figure 16: Unit-linked bonds and distribution bonds sales increased in 2005, contrasted with the decline of guaranteed equity bonds 42
Figure 17: Contrary to market trends, bancassurers have significantly increased sales of mortgage related products in 2005 43
Figure 18: Bancassurers’ sales of regular premium pensions have broken the downward trend in 2005 44
Figure 19: Stakeholder pensions remain by far the most popular form of regular premium pension in bancassurance 45
Figure 20: In 2005, stakeholder pensions emerged as most popular form of single premium pension in bancassurance 45
Figure 21: Sales of single premium life products through the single-tie channel declined strongly in the last five years 46
Figure 22: The non-intermediated distribution channel sees largest sales in regular premium life sector 47
Figure 23: Single premium pensions represent the only product category where the single-tie channel has seen growth in 2005 48
Figure 24: Sales of regular premium pension products through the non-intermediated channel have shown an increase in 2005 49
Figure 25: Single outlet firms have increased significantly since 2005 59
Figure 26: Network members have significantly declined since 2003 60
Figure 27: Total IFA turnover increased by 9.6% between 2005 and 2006 62
Figure 28: Network members have seen a significant decrease in average turnover per firm since 2005 63
Figure 29: Sesame maintained its position as the largest UK IFA firm in 2006 64
Figure 30: Barclays has the largest branch network of all banks and building societies in the UK 65
Figure 31: HBOS is the dominant player in the UK bancassurance market 67
Figure 32: A number of non-traditional distributors have entered the UK financial services sector in the last 10 years 69
Figure 33: UK’s major insurers are increasingly seeking to diversify their distribution strategies to reach a broader customer audience 80
Figure 34: UK’s top 5 providers control almost 50% of the total UK life and pensions market 81
Figure 35: In terms of advertising, financial companies spend significantly more on life insurance than pension products 83
Figure 36: HBOS recorded highest sales of single premium life products in 2005 84
Figure 37: Legal & General recorded highest sales of regular premium life products in 2005 85
Figure 38: Aviva recorded highest sales of single premium pension products in 2005 86
Figure 39: Standard Life recorded highest sales of regular premium pension products in 2005 87
Figure 40: IFAs will remain the most dominant distribution channel in the UK in the next 5 years 108
Figure 41: Multi-tie advisors and multi-tie bancassurers will see the greatest increases in terms of sales in the next 5 years 109
Figure 42: The regular premium life market will see a slight decline in the next five years 110
Figure 43: SIPPs are expected to drive IFAs single premium pensions sales in the next five years 111
Figure 44: IFAs account for the vast majority of regular premium pensions sales 112
Figure 45: “Quasi-Delphi” forecasting technique 128
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