The sales of pension and life insurance products have fallen in recent times as people’s disposable incomes fall as a result of the ongoing recession. Global ratings agency, Fitch Ratings, have done a comparison with six of the biggest insurance providers in the UK, comparing like for like sales for the six months of 2008 to the first six months of this year. New business fell 24% from£31bn to £23bn for Aviva, Friends Provident, Legal and General, Lloyds banking Group, Prudential and Standard Life.
Two other insurance giants AXA and AEGON reported APE falls of 17.7% and 22.5%, respectively. David Prowse from Fitch’s said that people were now less likely to purchase insurance and annuity products, but more likely to focus on reducing the amount they owe on their mortgage. Not only is there less people purchasing insurance products, there is also more people taking money out of their savings accounts to deal with living costs. AXA UK reported a net outflow of £255m for example.
However, pension annuity product sales have faired better than some other insirance products, this is because retirees already have a pension pot that they need to convert into an annuity, which must be done at age 75 at the latest. The majority of retirees convert their pension pot within a few months of retiring, which has help to keep annuity sales steady. In fact insurers are said to be benefitting from higher yields in the latter part of 2009 from investments they have made, these are used to fund annuity payments but can also mean high profits.
