The Protection Review Conference

1
The Year In Protection David Heeney Chief
Marketing Officer, UK Ireland Scottish Re
The Protection Review Conference 11th July 2007,
Café Royal
2
The Year In Protection - Agenda

• Are we making progress?
• News review
• Views of industry experts
• Immediate priorities
• Conclusions and agenda for the year(s) ahead

3
The Year In Protection - Agenda

• Are we making progress?
• News review
• Views of industry experts
• Immediate priorities
• Conclusions and agenda for the year(s) ahead

4
Overall trend in protection sales doesnt look
too bad
Source ABI
5
Although sales relative to GDP look less
encouraging
Source ABI/ONS
6
Protection relative to total life sales has
fallen sharply
Source ABI
7
Most worrying of all protection vs house
purchase loans
Source ABI/CML
8
Are we making progress?

• Computer says no

9
The Year In Protection - Agenda

• Are we making progress?
• News review
• Views of industry experts
• Immediate priorities
• Conclusions and agenda for the year(s) ahead

10
News Review

• They say a week in politics is a long time
• A year in protection is an eternity!
• The past 12 months have produced many stories
  affecting our industry
• Here are some of the most significant

11
July/August 2006
12
Liverpool Victoria offers Red Arc services to all
CI policyholders
ABI launches new SOBP for PMI
ABI says sales of life pensions up 25
Scottish Equitable Protect research 40 have
false CI expectations
ABI launches member consultation on improving
clarity in on-line and telephone applications for
life and health protection insurances
ABI launches PPI checklist
FSA to consult on term assurance age 70 rule
13
September/october 2006
14
GE Life sold to Swiss Re
Axa buys Thinc Destini for 100m
ABI supports abolition of age 70 rule
Liverpool Victoria updates Flexible Protection
Plan using STP
Standard Life buys stake in Simply Biz
Pru turns against those IFAs that churn
Royal Liver launches new CI product based on ABI
standards
FSA uncovers more PPI failings
OFT refers PPI sector to Competition Commission
Scottish Widows terminates ASDA partnership
15
November/december 2006
16
Unum Provident extends IP Plan to age 70
Kenny leaves ABI
Income Protection Taskforce launches White Paper
Standard Life re-launches IP product
ABI changes SOBP cancer definitions
ABI Income Protection Workshop Towards 10
million satisfied customers
17
January 2007
18
LifeSearch tie up with ASDA
FSA fines GE Capital Bank 610,000 for PPI
failings
Tines Up At FSA
Treasury may revive PTA in a different format
19
february 2007
20
Repossessions hit six-year high
FSA fines Capital One 175,000 for PPI misselling
Treasury backtracks on PTA U-turn
Legal General buys Nationwide subsidiaries
LG sells PMI business to Axa
OFT refers PPI market to Competition Commission
for further investigation after public
consultation
Prudential 43.9m protection claims declined
21
MARCH 2007
22
PPI refunds good for consumers, says FSA
Liverpool Victoria re-brands as "LV"
Haddrill urges Balls on PTA
LG upgrades CI cover
FSA makes case for PTA
Budget Government kills PTA
Pru announces launch of PruLife (50/50 JV with
Discovery)
LV takes equity stake in Lighthouse Group
FSA ICOB Review Interim Report published
23
april 2007
24
Royal London and Royal Liver in merger talks
LV and Bright Grey revamp CI cover
GE Life re-brands as Tomorrow
FSA scraps Age 70 rule
BUPA revises CI product
ABI consultation document on changes to PMI
definitions
PruHealth and Boots launch PMI on High Street
BUPA confirms it may sell off hospitals
Deadline for implementing ABI SOBP for CI
Nick Kirwan quits Scottish Widows
PTA pipeline deadline extended to 31 July
25
may 2007
26
Standard Life takes stake in threesixty
Base rate hits 5.5
Pioneer publishes IP claims stats 97 received
payout in 2006
Friends Provident buys Sesame and Pantheon
FOS announces reduction in protection complaints
Capital wins 580m Resolution deal
LV to buy Tomorrow
27
june 2007
28
NU cuts protection rates
Kirwan replaces Walsh at ABI
Lloyds TSB paves way for sale of Abbey Life
LV slashes term assurance rates
British Insurance launches new PPI policy
Aegon Scottish Equitable extends life cover to
age 75
PPI providers still putting prices up
29
julY 2007
30
Pioneer launches new IP plan for professionals
ABI produces consumer guide on critical illness
HBOS launches new mortgage protection plan
31
The Year In Protection - Agenda

• Are we making progress?
• News review
• Views of industry experts
• Immediate priorities
• Conclusions and agenda for the year(s) ahead

32
The Expert Panel

• Nearly 80 response rate
• Respondents included

THANK YOU!
33
Most significant developments (comments
attracting five or more votes)
34
Most significant developments (other suggestions)

• Increased use of technology to improve new
  business application processes
• Increased use of tele-underwriting
• Age discrimination directive
• Growing impact of TCF
• Increased focus on IP
• Providers buying distributors
• Increased intensity of price competition
• Swiss Re acquisition of GE
• FSAs ICOB review
• Increased reinsurance capacity for guaranteed CI

35
Successes/heroes (comments attracting five or
more votes)
36
Successes/heroes (other suggestions)

• ABI for new standard CI definitions
• Virgin for Big C product
• COVER for Promoting Protection campaign
• Law Commission (stirring the pot on
  non-disclosure / claims declinatures)
• Growth in use of added value benefits (Red
  Arc, Best Doctors etc.)
• Direct Life Pensions for "Intelligent
  Protection
• Scottish Re for surviving!

37
Biggest challenges (comments attracting five or
more votes)
38
Biggest challenges (other suggestions)

• Effective distribution (focused on protection
  rather than savings business)
• Managing fallout from PPI review (all products
  tarred with same brush)
• Non-advised sales
• Changing solvency/reinsurance landscape
• Reducing churning
• Avoiding CI definition creep
• Reducing dependence on the mortgage market for
  protection sales
• Retail Distribution Review

39
What could we do better? (comments attracting
five or more votes)
40
What could we do better? (other suggestions)

• Recognise that a totally price-driven market is
  in no-ones best interests
• Less regulation simpler products and acceptance
  processes
• Sort TPD
• Focus on innovation to grow market rather than
  chasing market share
• Government recognise and promote importance of
  protection business
• Increase confidence by publishing claims
  statistics
• Talk to each other!
• Improve access to advice for mass market
• Innovate on CI
• Talk to customers!

41
New Business - Prospects
42
Number of providers - prospects
43
The Year In Protection - Agenda

• Are we making progress?
• News review
• Views of industry experts
• Immediate priorities
• Conclusions and agenda for the year(s) ahead

44
Somewhere along the way we stopped explaining
insurance

• There are two ways for individuals to make
  provision for future financial needs

• Which offers greater benefit to society as a
  whole?
• Which should the government encourage via tax
  incentives?
• Where did we go wrong?

45
To regain trust we must understand and manage
customer expectations

• Scottish Re consumer research produced the
  following results
• Almost half of respondents thought life companies
  should not be allowed to reject a death claim if
  important facts were omitted when the product was
  taken out
• Around one-third thought that insurance companies
  should always pay claims in full
• Only one in eight supported claims being declined
  due to non-linked non-disclosure
• Over three-quarters were in favour of a time
  restriction for investigating claims
• Almost two-thirds felt insurers should not rely
  solely on customer disclosures to underwrite

ICM interviewed a random sample of 1012 adults
aged 18 plus by telephone across the UK between
3-5 November 2006. ICM is a member of the British
Polling Council and abides by its rules. Further
information at www.icmresearch.co.uk.
46
Declined claims and non-disclosure are key to
customer confidence

• Claim declinature rates due to non-disclosure are
  now unsustainably high
• Consumers perceptions of fairness are not
  consistent with current industry practice
• In some cases customer expectations are
  unreasonable, so we must communicate better
• Non-linked non-disclosure is a particular problem
  which damaging the industrys reputation
• 5-year non-contestability might not be such a
  disaster
• These problems affect the whole industry all
  providers, all advisers, all products
• The Law Commission proposals are a timely prompt
  for industry-wide review and action

47
The Year In Protection - Agenda

• Are we making progress?
• News review
• Views of industry experts
• Immediate priorities
• Conclusions and agenda for the year(s) ahead

48
Conclusions and future agenda

• New business volumes are likely to increase
  there is hope!
• But not for everyone number of providers is
  likely to fall
• Key messages
• We must communicate the value of
  protection/insurance
• We have to address non-disclosure/claim
  declinatures
• (Re-)building customer trust and confidence is
  our biggest challenge
• Consumers need to be convinced about the value of
  advice
• We have to widen distribution, improve access
• We need more product and process innovation
• Industry-wide initiatives are making progress

49
Looking ahead..

• Things can only get better

50
The Year In Protection David Heeney Chief
Marketing Officer, UK Ireland Scottish Re
The Protection Review Conference 11th July 2007,
Café Royal