Direct insurance sales to surge – but struggle with retention
Directly-sold lump sum and income protection insurance sales will continue to surge but will struggle to stay on the books past the first year, according to research data released by Plan for Life.
In the next five years sales of the two insurance products are expected to reach $719 million, with In Force business expected to reach $2.514 billion by 2018.
According to samples collected by Plan for Life from companies selling both direct and adviser-based insurance, lapse rates will be high — with the direct market shedding an average of 39 per cent of policies in the first year compared to an average of 8.4 per cent for advice-based sales.
These figures became more uniform in the second year, with both direct and advice-based business predicted to have average lapse rates of about 13 per cent.
Lump sum insurance is predicted to outsell income protection by a factor of 16 to 1 and will grow from $463 million in sales in 2012 to $673 million in 2018. Plan for Life predicts income protection will grow from $34 million to $46 million in sales.
In Force lump sum insurance and income protection business is expected to grow from $1090 million and $114 million respectively to $2261 million and $253 million by the end of 2018.
However, the absence of advice around these insurance products will also be clear, with lapse rates clawing back much of the growth in the direct insurance sector.
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