1
The Protection Review Conference
11th July 2007, Café Royal
The Year In Protection
David Heeney
Chief Marketing Officer, UK & Ireland
Scottish Re
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 doesn’t look too bad……
TOTAL PROTECTION APE (£m)
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: ABI
5
Although sales relative to GDP look less encouraging
TOTAL PROTECTION / GDP
0.00%
0.02%
0.04%
0.06%
0.08%
0.10%
0.12%
0.14%
0.16%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: ABI/ONS
6
Protection relative to total life sales has fallen sharply
TOTAL PROTECTION / TOTAL APE
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: ABI
7
Most worrying of all: protection vs house purchase loans
TOTAL PROTECTION / HOUSE PURCHASE LOANS
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
1.80%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: ABI/CML
8
Computer says “no”
Are we making progress?
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
ABI launches member consultation on improving clarity in on-line and telephone applications for life
and health protection insurances
FSA to consult on term assurance “age 70” rule
ABI launches new SOBP
for PMIScottish Equitable Protect research: “40% have false CI expectations”
ABI launches PPI checklist
Liverpool Victoria offers Red Arc services to all CI policyholdersABI says sales of life & pensions up
25%
13
September/october 2006
14
OFT refers PPI sector to Competition
Commission
Royal Liver launches new CI product based on ABI standards
GE Life sold to
Swiss Re
FSA uncovers more PPI failings
Standard Life buys stake in
Simply Biz
Axa buys Thinc Destini for £100mLiverpool Victoria updates Flexible Protection Plan using STP
ABI supports abolition
of “age 70” rule
Scottish Widows terminates ASDA partnership
Pru turns against those IFAs that churn
15
November/december 2006
16
ABI Income Protection Workshop: Towards 10 million
satisfied customers
Standard Life re-launches IP product
Unum Provident extends IP Plan to age 70
Kenny leaves ABIIncome Protection Taskforce launches White Paper
ABI changes SOBP cancer
definitions
17
January 2007
18
“Tine’s Up At FSA”
Treasury may revive PTA in a different format
LifeSearch tie up with ASDAFSA fines GE Capital Bank
£610,000 for PPI failings
19
february 2007
20
Legal & General buys Nationwide subsidiaries
Prudential: “£43.9m protection claims declined”
OFT refers PPI market to Competition Commission for
further investigation after public consultation
Repossessions hit six-year high
FSA fines Capital One £175,000 for PPI misselling
Treasury backtracks on PTA U-
turn
L&G sells PMI business
to Axa
21
MARCH 2007
22
Haddrill urges Balls on PTA
Liverpool Victoria re-brands as
"LV="
PPI refunds good for consumers, says FSA
Pru announces launch of PruLife (50/50 JV
with Discovery)
FSA ICOB Review: Interim Report published
L&G upgrades CI coverFSA makes case for PTA
Budget: Government kills
PTA
LV= takes equity stake in Lighthouse Group
23
april 2007
24PTA pipeline deadline
extended to 31 July
FSA scraps Age
70 rule
PruHealth and Boots launch PMI on High Street
GE Life re-brands as “Tomorrow”
LV= and Bright Grey revamp CI cover
Deadline for implementing ABI SOBP for CI
BUPA confirms it may sell off hospitals
BUPA revises CI
product
Nick Kirwan quits Scottish Widows
Royal London and Royal Liver in merger talks
ABI consultation document on
changes to PMI definitions
25
may 2007
26
FOS announces reduction in
protection complaints
LV= to buy
Tomorrow
Standard Life takes stake in
threesixty
Friends Provident buys Sesame and Pantheon
Base rate hits 5.5%
Pioneer publishes IP claims stats: 97% received
payout in 2006
Capital wins £580m
Resolution deal
27
june 2007
28
Aegon Scottish Equitable extends life
cover to age 75
British Insurance launches new PPI
policy
NU cuts protection ratesKirwan replaces
Walsh at ABI Lloyds TSB paves way for sale of Abbey Life
PPI providers still putting prices up
LV= slashes term assurance rates
29
julY 2007
30
HBOS launches new mortgage protection plan
Pioneer launches new IP plan for
professionals
ABI produces consumer guide on critical illness
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!
Andrew Howe Jerry Staffurth Richard WalshAndy Chapman Johanna Gornitzki Rod McKieAndy Couchman John Jenkins Ross AinslieBernie Hickman John Lister Roy ChappellChris McFarlane John Perks Steve CaseyClive Waller Kevin Carr Stuart HillDennis Smith Markus Luetzelschwab Sue ElliottGordon Sills Mike Warr Susie Cour-PalaisIan Woolliss Nick Kirwan Warren CoppJason Hurley Petra McFarlaneJeff Davies Peter Le Beau
33
Most significant developments (comments attracting five or more “votes”)
1. What have been the most significant developments (good or bad) in UK protection business over the past 12 months (or so)?
PTA - introduction and withdrawal
19%
New Prudential product
12%PS06/14
(FSA changes in statutory reserving
requirements)11%
CI claims under scrutiny
9%
FSA/OFT review of PPI9%
Publication of claim statistics
8%Law Commission Issues Papers
(Non-contestability / non-disclosure)
9%
ABI initiatives: SOBP / standard CI
definitions; Protection Committee
23%
34
• 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
• FSA’s ICOB review
• Increased reinsurance capacity for guaranteed CI
Most significant developments (other suggestions)
35
Successes/heroes (comments attracting five or more “votes”)
2. What individual successes or breakthroughs were achieved (who were the "heroes" and why)?
Prudential - product innovation
37%Peter Le Beau / Clive Waller: Income
Protection Taskforce23%
Life Search - successful and
responsible lobbying on importance of advice + ASDA
initiative23%
Pioneer: success with innovative product and
publishing IP claim stats17%
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”)
3. What will be the biggest challenges facing UK protection business over the next 4-5 years?
Avoiding excessive/detrimental
regulation or legislation
(inc Law Commission conclusions)
16%
Building trust/confidence
among customers24%
Growing new business volumes
(profitably)14%
Further simplifying applications and risk
acceptance10%
Increased price pressure: too much
supply; too little demand
10%
Reducing claims declined due to non-
disclosure10%
Innovation; avoiding "commodity product"
approach to protection business
8%
Growing IP sales (without reducing
sales of other products)
8%
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”)
4. What could providers, reinsurers, advisers, regulators, industry bodies or any other key groups do better over the next 12 months to improve the outlook for
UK protection business and our customers?
Address declined claims due to
non-disclosure (esp. non-linked)
25%
Positive press about protection business
18%
Educate intermediaries
14%
Educate consumers on the need for
protection11%
Simplify advice processes; increase
standardisation of non-competitive features
14%
Embrace TCF - why are we still
selling PPI and not IP?18%
40
What could we do better? (other suggestions)
• Recognise that a totally price-driven market is in no-one’s 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 - Prospects5. Over the next 3-5 years do you think new business volumes of UK protection
business will increase, stay about the same or reduce?
Increase44%
Stay about the same47%
Reduce9%
42
Number of providers - prospects6. Over the next 3-5 years do you think the number of UK protection providers will
increase, stay about the same or reduce?
Stay about the same50%
Reduce44%
Increase6%
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
• There are two ways for individuals to make provision for future financial needs:
Somewhere along the way we stopped explaining “insurance”
• Which offers greater benefit to society as a whole?• Which should the government encourage via tax incentives?• Where did we go wrong?
Savings Insurance
45
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
To regain trust we must understand and manage customer expectations
* 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 industry’s 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
• 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
Conclusions and future agenda
49
“Things can only get better”
Looking ahead…..
50
The Protection Review Conference
11th July 2007, Café Royal
The Year In Protection
David Heeney
Chief Marketing Officer, UK & Ireland
Scottish Re
Top Related