Part of the BGL Group Wednesday 15 th June 2011 Bridging the Gap: How can greater demand for...

Part of the BGL Group

Wednesday 15th June 2011

Bridging the Gap: How can greater demand for

protection be generated?

“Grave Yard Slot”


• What role should the Government take? And providers? And distributors?

• Will innovation in products or distribution deliver greater customer engagement?

• Exploiting mobile and online media to connect with consumers in the protection space

How Can Greater Demand For Protection Be Generated?


One way of Approaching it…..• Introductions

• The Consumer

• The market and business opportunity

• Me

• The Role of Government

• Simpler products = consumer engagement = more sales?

• Easier access – via mobile app = consumer engagement?


Who Am I to talk to YOU about Anything?

• LifeSearch

• Protection Adviser of the year most every year!

• CPIEC Founder

• 800 policies ON RISK a week

• £14m Revenue at 10% EBITDA Margin

• Rolling 3 month revenue 26% up on 2010

• 85 specialist advisers

• Partnering ASDA, Swinton and The Meerkat


Would you recommend LifeSearch to a friend or family member?


The Protection Market – Latest ABI StatsTABLE 13 - PROTECTION PRODUCTS - REGULAR PREMIUM

Number of New Contracts

IFAs / WoM Single Tie Non-IntermediatedTotal New Premiums

of which: Bancassurance

000 £m £m £m £m £m

13k - TOTAL

2005 2,036 768 383 131 1,282 291

2006 2,003 720 375 121 1,216 287

2007 2,086 733 342 109 1,185 260

2008 2,051 685 337 126 1,148 257

2009 2,263 730 385 81 1,196 326

2010 2,446 670 332 58 1,061 259

2008 Qtr 1 480 167 81 41 290 61

Qtr 2 523 191 83 29 304 63

Qtr 3 536 170 96 29 294 77

Qtr 4 511 157 76 27 260 55

2009 Qtr 1 543 165 107 23 295 90

Qtr 2 533 175 94 19 289 75

Qtr 3 658 195 95 20 311 90

Qtr 4 529 195 89 18 302 71

2010 Qtr 1 604 161 88 17 265 70

Qtr 2 600 174 86 15 275 68

Qtr 3 592 164 82 14 260 63

Qtr 4 649 171 77 13 261 58

2011 Qtr 1 605 161 81 17 258 61


New Protection Policies Sold

1500

1700

1900

2100

2300

2500

2006 2007 2008 2009 2010 2011E

'000s

Year


Premium Value of New Protection Policies Sold

1000

1050

1100

1150

1200

1250

2006 2007 2008 2009 2010 2011E

£ Millions

Year


Premium Value of Whole of Life Policies Sold

Year

0

25

50

75

100

125

150

2006 2007 2008 2009 2010 2011E

£ Millions


Premium Value of (Proper) Income Protection

Year

40

42

44

46

48

50

52

54

56

58

60

2006 2007 2008 2009 2010 2011E

£ Millions


£0

£10,000,000

£20,000,000

£30,000,000

£40,000,000

£50,000,000

£60,000,000

£70,000,000

2004 2005 2006 2007 2008 2009Endowment Policies Accidental Death Plan Income Protection Ins

Critical Illness Long Term Care Ins Life Protection

Over 50 Life Protection Life Assurance - Monthly saving plan Sheps - 2nd hand endowment

Term Assurance

Spend by Category

Source: Life category in Nielsen Addynamix 2009 (Life Protection, Critical Illness, Term Assurance, Income Protection). * 2009 data Jan-May

*


The Consumer - What drives the protection gap?

• Are we dealing with a communications-led problem

• Or just another product people don’t need anymore?


Life Expectancy TrendsFemale Life Expectancy

67.5

68.7

69.8

71 7

3.1

74.2

75.3

56.5

57.7

58.9 60

62.2

63.2

64.3

45.2

46.8

48.1

49.2

51.4

52.4

53.5

33

36

37.6

38.7

40.8

41.8

42.8

0

10

20

30

40

50

60

70

80

1981 1991 2001 2011 2031 2041 2051

Ye

ars

fro

m a

tta

ine

d a

ge

20

30

40

50

Based on UK historical mortality rates from 1981 to 2008 and assumed calendar year mortality rates from the 2008-based principal projections. ONS Data. ©Hannover Life Re (UK)


Male Mortality TrendMale Mortality Rates (% against 2008 base)

0.4

0.5

0.6

0.7

0.8

0.9

1

1.1

2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032

20

30

40

50

Based on UK mortality rates against 2008 expressed as a %. ONS Data ©Hannover Life Re (UK), May 2011


Female Mortality TrendsFemale Mortality Rates (% against 2008 base)

0.4

0.5

0.6

0.7

0.8

0.9

1

1.1

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

20

30

40

50

Based on UK mortality rates against 2008 expressed as a %. ONS Data ©Hannover Life Re (UK), May 2011


But They Do Still Need Us!

• We sell personal catastrophe insurance.

• Death and Disability do happen and they do happen young too.

• £2.3 trillion protection gap =

• average family shortfall of £45,000 if basic living standards are to be maintained in the event main breadwinner dies.

• Shortfall is £55,000 in the event that the breadwinner becomes incapacitated.

• Employers cutting back benefits-in-kind and government cutting sickness benefits.

• Savings levels are microscopic and debt is rising.


The Consumer - What drives the protection gap?

• Are we dealing with a communications-led problem?

• YES

Or just another product people don’t need anymore?

• NO


Why do they resist our communications?

• Is it Scandals - Endowments and PPI?

• The media or the FSA’s negative approach?

• Is it lack of Consumer Education?

• Is it complexity of products and language?

• Or is it that they don’t see the need?

• Is that because of the Welfare State ‘lie’?

• Or is it that no one explains that there is one?

• Do we need to get through by Mobile App?


Why do they resist our communications?

• Is it Scandals - Endowments and PPI?

• NOT INSURMOUNTABLY SO AT ALL

• Is it the media or the FSA’s negative approach?

• LIVE WITH IT, IT’S A GIVEN UNTIL WE HAVE GOOD NEWS

• Is it lack of Consumer Education?

• OF COURSE, BUT ARE WE 60’S SOCIALISTS THAT WE THINK THAT’S THE GOVERNMENTS JOB?


Why do they resist our communications? 2

• Is it complexity of products and language?

• THEY ARE SIMPLER THAN AN IPHONE!

• Or is it that they don’t see the need?

• Is that because of the Welfare State ‘lie’?

• Or is it that no one explains that there is one?

• YES, BUT WHO IS TO TELL THEM?

• Will a Mobile App do the trick.

• NO, NOT ON ITS OWN, NOT AT ALL!


£0

£10,000,000

£20,000,000

£30,000,000

£40,000,000

£50,000,000

£60,000,000

£70,000,000

2004 2005 2006 2007 2008 2009Endowment Policies Accidental Death Plan Income Protection Ins

Critical Illness Long Term Care Ins Life Protection

Over 50 Life Protection Life Assurance - Monthly saving plan Sheps - 2nd hand endowment

Term Assurance

Spend by Category

Source: Life category in Nielsen Addynamix 2009 (Life Protection, Critical Illness, Term Assurance, Income Protection). * 2009 data Jan-May

*


Occam’s Razor!

Year

0

25

50

75

100

125

150

2006 2007 2008 2009 2010 2011E

£ Millions


Occam’s Razor!

Year

0

25

50

75

100

125

150

2006 2007 2008 2009 2010 2011E

£ Millions

‘If two or more competing theories exist as to what

causes a particular outcome, the simpler one is

likely to be right”


Old News: CPIEC Campaign challenges

• Create a disturbance campaign aimed at changing consumer behaviour and growing the market

• Central messages to be needs-based providing generic promotion of protection themes

• Independent of industry and provide ‘clear blue water’ between the consumer and financial promotions

• Provide the consumer with a fulfilment mechanism

• Delivery mechanism will be online with many other aspects of the ongoing campaign supported by other mechanisms


Our hypothesis – the brief for research

• There is a sizeable target who will buy more protection -via products they already have, and products that they don’t but should have

• We need to understand the barriers preventing them from further engaging in the sector and

• Devise a communications strategy that will overcome them

Specifically, we need to understand:1. Who this target is

2. Role for communications


Research objectives• Claimed ownership of insurance & protection cover by

product / provider

• Awareness of insurance and protection product types available

Consumer Awareness

Consumer Understanding

Market Segmentation

Four Key Objectives

Media Consumption

• Identify consumers’ media consumption across a range of channels (online, TV, press, radio, magazines, cinema, etc) and show which would be effective for communicating a motivating insurance and protection message

• Consumer attitudes to insurance and protection to help derive a market segmentation for future targeting purposes

• What consumers understand by different product types• Claimed versus ‘proven’ basic levels of consumer

understanding


Awareness of insurance productsOwnership and Awareness

2%

2%

9%

12%

11%

19%

23%

25%

42%

65%

55%

75%

75%

23%

41%

55%

53%

55%

58%

52%

55%

58%

45%

23%

35%

15%

16%

5%

Family Income Benefit

Hospital Plans

Funeral plans

Income protection

Accident, sickness & unemployment

Credit card payment protection

Critical illness insurance

Mortgage payment protection

Health insurance

Travel insurance

Buildings insurance

Life insurance

Home contents insurance

Motor insurance 91%

90%

90%

88%

87%

83%

78%

71%

69%

67%

62%

57%

Own product Aware but don’t ownTotal

Awareness

1.8

Disengaged Policy Holders

1.8

TARGET PRODUCTS OWNED Population Mean

– 1.3

Confused Policy Holders

Significantly higher for:

46%

25%

Target Products


Getting information about policiesClaimed Sources of Information About Taking Out Insurance

50%

44%

37%

31%

27%

24%

23%

20%

17%

14%

10%

49%

Family and friends

Indepent Financial Advisors

Comparison Websites

My Bank

Online Expert Panels

Government Websites

Insurance Agents

Specialist magazines

Online Discussion forums

Insurance Broker

Newspaper Personal Finance sections

My Insurer

Disengaged Policy Holders

Confused Policy Holders

= significantly different vs. Total respondents (weighted)


21%

20%

23%

16%

21%

Attitudinal segmentation

CONFUSED POLICY HOLDERS

SELF SUFFICIENTS

NO NEED FOR INSURANCE

FINANCIALY STRAPPED

DISENGAGED POLICY HOLDERS

*Average policies owned based on 8 target products: Life Assurance, Critical Illness Cover, Credit Card Payment Protection, Income Protection, Funeral Plans, Family Income Benefit, ASU, Mortgage Payment Protection

1.8

1.8

1.3

1.3

0.6

Above Average

Average Below Average

Average number of policies owned*

Five segments identified based on their attitudes towards insurance and protection

Population: 7.32 million



Population: 14.07 millionPopulation: 8.44 million


Key findings

1. Confused Policy Holders

Recognise the importance of insurance cover but find policies complex and confusing

2. Disengaged Policy HoldersRecognise the importance of insurance cover but not actively engaged due to reliance on others for security

3. Financially StrappedDon’t have other sources to rely on for security and have financial constraints to getting insurance cover

4. Self SufficientsHave other sources to rely on: savings, spouse's income and therefore don’t feel the need of getting insurance

5. No Need for InsuranceFeel they don’t have much at stake and have other priorities to think about than getting insurance


*TGI Q2 2009

Self Sufficient

No Need

Confused

Financially Strapped

Disengaged

Self Sufficient

Financially Strapped


Communications objective

“I’m not sure what I’ve got or what

it’s for”

“I’m clear about what I’ve got and feel good about it”

Confusion

Virtuous

Indifference

Clarity


E.g. From ‘indifference’ to ‘virtuous’ - Fire Authority of Northern Ireland• Failure to take very basic, practical, ‘boring’

precautions…

• Check smoke alarm batteries

• Never leave a chip pan alone

• Position candles with care

• Keep doors closed

• Can lead to horrific consequences


Fire Authority of Northern Ireland


Fire Authority of Northern Ireland - results

• 14% decrease in total number of household fires

• 12% decrease in fire injuries

• 60% of people influenced to do something practical to prevent fires


Opportunity for the protection insurance category• There is an opportunity to

Break protection insurance down into manageable, practical, clear, simple to understand bite size chunks

• There is also an opportunity to

Get people to understand that if they own a home, have a job or have a family, getting protection insurance is a ‘responsible’, ‘virtuous’, ‘positive’ behaviour


Can we break the sector down into manageable information/customer journeys?

Life Critical illness

Income protection

Payment protection

Home-owners Kids Jobs

OR


CPIEC broad-based call-to-action

• Promote Critical behavioural changes through better understanding of:

• Your financial risks

• Your health risks

• Your lifestyle risks

• Build strategic partnerships with organisations e.g.

• Government, Money Advice Service; Health Charities


OVER HALF OF UK ADULTS HAVE NO LIFE INSURANCE, LEAVING MANY FAMILIES VULNERABLE

•56% of adults in the UK don’t have any life insurance in place to secure the financial wellbeing of their loved ones

•More UK adults insure their pets (15%) and mobile phones (13%) than they do their income in case of ill health (12%)

•One-fifth of the population would consider cutting back on critical illness cover (21%) and life insurance (20%) compared to just 15% prepared to cut back on broadband access

•Over half the population (54%) say they review their finances regularly, yet uptake of protection products remains low

New research from Scottish Widows shows that an estimated 28 million¹ of the UK population do not have any life insurance in place, leaving their loved ones vulnerable to financial insecurity if something were to happen to them.

The third Scottish Widows Consumer Protection Report, which details research carried out on 5,148 UK Adults², shows that many are continuing to shun protection products including life insurance, critical illness cover and income protection.

Although over half of the UK population (54%) admit to reviewing their finances once or twice a year and awareness of protection is high, the reality is that the take up of these products remains exceptionally low. From those surveyed, 97% were aware of life insurance and the importance of having it, however only 44% had cover. Similarly, when it comes to critical illness cover the awareness remains high (86%). However the percent of respondents who have actually taken out a product is worryingly low at just 12%. The same goes for income protection insurance where the awareness is 83%, with take up at just 7%.

The research also shows that almost a quarter of the UK population (23%) say they believe they cannot afford life insurance and when it comes to critical illness cover 26% state this as their primary barrier to not taking it out.


How can greater demand for

protection be generated?


Occam’s Razor!

Year

0

25

50

75

100

125

150

2006 2007 2008 2009 2010 2011E

£ Millions

‘If two or more competing theories exist as to what

causes a particular outcome, the simpler one is

likely to be right”


How to Generate Demand.

• Effectively Explain to our target markets:

• Why they need what we have to offer,

• What can happen it you don’t have it

• What happens when it works for those in need.

• Why it’s wise and virtuous to spend money on it

• Then Just Promote and Fulfil.

Part of the BGL Group Wednesday 15 th June 2011 Bridging the Gap: How can greater demand for...

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