The Future of the UK Life Industry

The UK life insurance industry has a huge opportunity to become the retail interface between the UK’s workforce and pensioners, and their retirement savings.

We forecast that in 10 years’ time the industry will have £1,200 BN on insurance platforms, and will be paying pensions of around £35 BN per annum.

This report sets out Oliver Wyman’s market projections for the UK life insurance industry over the next five years, and our view on the key issues and opportunities that insurers will need to get right in order to win in the market place.

There is a massive shareholder value prize in the pensions market, but it will take five years to prove the shareholder case
On the way to proving the growth potential, life insurers must focus hard on cash generation from the in-force book, particularly cost control, and illiquid investments
Insurers will need to take bold decisions now about whether to invest to capture the huge upside in the bulk annuity market

Pension Shake-up - The Opportunity for the UK Life Industry

The UK life industry has a huge opportunity to become the retail interface between the UK’s workforce and pensioners, and their retirement savings. We forecast that in 10 years’ time the industry will have £1,200 BN on insurance platforms, and will be paying pensions of around £35 BN per annum (p.a.).

1There has been a big shake up in the UK’s insurance industry following the Budget 2014 announcement, what has changed?

The budget reform gives new retirees much more choice about how to invest their pension funds. This will give savers greater access to their pension but also means that they have more complex retirement decisions to make. This year will be a period of transition for the UK life insurance industry, as insurers respond to the change.
2How has this impacted the UK’s insurance industry?

There’s no doubt the UK’s pension reform has forced the industry to reflect and innovate in new radical investment in client propositions. Our report sets out Oliver Wyman’s market projections for the UK life insurance industry over the next five years, and the key issues and opportunities that insurers will need to get right in order to win in the market. Insurers who successfully transform themselves, will be hugely valuable businesses with long term dividend growth prospects around 4% p.a. higher than today.
3What is the outlook for the industry?

The UK life insurance industry has a more clearly defined role in the economy, serving as the private sector component of the social security system, helping workers to save for their retirements and managing their savings post-retirement. There are two stand-out opportunities which are the UK’s new flexible retirement system and the bulk annuity market, which we expect will capture between 25% and 50% of the UK private defined-benefit scheme assets of £1,200 over the next 20 years.
4How can the UK insurers capture this new opportunity and drive sustainable growth?

Those insurers who successfully make this transition will need to develop a strong in-force management strategy, particularly cost control and illiquid investments. Insurers will need to take bold decisions on whether to invest in the bulk annuity market and invest in new technical capabilities that facilitate rapid evolution and meet the customers’ needs. Our report sets out key actions insurers need to take to ensure success and to build shareholder value.