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Wednesday 15th June 2011
Bridging the Gap: How can greater demand for
protection be generated?
“Grave Yard Slot”
Part of the BGL Group
• 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?
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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?
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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
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Would you recommend LifeSearch to a friend or family member?
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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
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New Protection Policies Sold
1500
1700
1900
2100
2300
2500
2006 2007 2008 2009 2010 2011E
'000s
Year
Part of the BGL Group
Premium Value of New Protection Policies Sold
1000
1050
1100
1150
1200
1250
2006 2007 2008 2009 2010 2011E
£ Millions
Year
Part of the BGL Group
Premium Value of Whole of Life Policies Sold
Year
0
25
50
75
100
125
150
2006 2007 2008 2009 2010 2011E
£ Millions
Part of the BGL Group
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
Part of the BGL Group
£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
*
Part of the BGL Group
The Consumer - What drives the protection gap?
• Are we dealing with a communications-led problem
• Or just another product people don’t need anymore?
Part of the BGL Group
Part of the BGL Group
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)
Part of the BGL Group
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
Part of the BGL Group
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
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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.
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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
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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?
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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?
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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!
Part of the BGL Group
£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
*
Part of the BGL Group
Occam’s Razor!
Year
0
25
50
75
100
125
150
2006 2007 2008 2009 2010 2011E
£ Millions
Part of the BGL Group
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”
Part of the BGL Group
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
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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
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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
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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
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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)
Part of the BGL Group
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: 10.13 million
Population: 9.01 million
Population: 14.07 millionPopulation: 8.44 million
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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
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*TGI Q2 2009
Self Sufficient
No Need
Confused
Financially Strapped
Disengaged
Self Sufficient
Financially Strapped
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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
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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
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Fire Authority of Northern Ireland
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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
Part of the BGL Group
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
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Can we break the sector down into manageable information/customer journeys?
Life Critical illness
Income protection
Payment protection
Home-owners Kids Jobs
OR
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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
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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.
Part of the BGL Group
Part of the BGL Group
How can greater demand for
protection be generated?
Part of the BGL Group
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”
Part of the BGL Group
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.