The Year In Protection David Heeney Chief Marketing

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

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 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

Overall trend in protection sales doesn’t look too bad…… Source: ABI 4

Although sales relative to GDP look less encouraging Source: ABI/ONS 5

Protection relative to total life sales has fallen sharply Source: ABI 6

Most worrying of all: protection vs house purchase loans Source: ABI/CML 7

Are we making progress? Computer says “no” 8

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 9

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………… 10

july/august 2006 11

Liverpool Victoria offers n ABI launches MI ew SOBP for P ABI Red Arc services to all C I policyholders says sale s of life & pe nsio Scottish E quitable P rotect res “ 40% hav earch: e false CI expectatio ns” ns u p 25 % ABI launches member consultation on improving clarity in on-line and telephone applications for life and health protection insurances list FSA to consu lt on term as 12 eck hes PPI ch ABI launc surance “ag e 70” rule

september/october 2006 13

GE Life sold to Swiss Re Axa buy s Thinc D ge 70” rule rts abolition of “a ABI suppo estinifo r £ 100 m Liverpool V ictoria upd ates Flexib Biz Protection le Simply Plan using stake in STP ys Life bu rd Pru turns Standa against t hose. IFAs that chur n Royal Liver launches new CI product based on ABI standards ings re PPI fail rs mo SA uncove F mmission to Competition Co ctor OFT refers PPI se Scottish Widows terminates ASDA partnership 14

november/december 2006 15

e to ag lan Unum nt ovide Pr P ds IP xten e 16 S anges ch Taskforce launch es White Paper d Life r e-launch es IP pr oduct s nition fi er de c P can B O ABI Kenny leaves ABI Income Protection Standar 70 op: ection Worksh rot ABI Income P ustomers lion satisfied c l Towards 10 mi

january 2007 17

FSA f Life. Search e up wit ti h ASDA ines G E Cap ital B ank £ 610, “ 18 p e’s U Tin FSA” At 000 for PP I faili ngs at ent form iffer A in a d e PT ay reviv ym Treasur

february 2007 19

g Repossessions hit six-year high in sell s I mi P r. P fo , 000 £ 175 ne O ital p s Ca fine FSA Legal & A Uks on PT c y backtra Treasur Genera l buys N ationwi L& Gs ells PM I bu sine ss t o Axa de subs i diaries OFT refers PPI market to Competition Commission for further investigation after public consultation Prudential: “£ 43. 9 m protection claims declined” 20 turn

marc. H 2007 21

PPI refunds good for consumers, says FSA V=" as "L a re-brands ri erpool Victo Liv A L&G up PT grades Haddrill urges Balls on PTAls il CI cove k r nt FSA makes case for PTA me n ver o : G t ge d Bu overy) V with Disc /50 J Pru. Life (50 ch of ounces laun Pru ann LV= takes equity stake in Lighthouse Group FSA ICOB Review : Interim Report 22 published

april 2007 23

Royal London and Royal Liver in merger talks GE Life re-bra nds as “Tomor row” ct produ es CI A revis BUP at onsult ABI c i nt ocume on d o. P nges t n cha LV= and Bright Grey re ons iti I defin M o vamp CI cover ge 7 A scraps A FS 0 rule Pru. Health and Boots launch PMI on High Street BUPA conf ir ms it may for imple sell o menting ff ho ABI SOB spita P for CI ls uly Nick Kirwan quits Scottish Widows to 31 J ed xtend e adline de peline 24 PTA pi Deadline

may 2007 25

y threesixt ke in takes sta Life Standard Base ra te hits 5. 5% 06 out in 20 ed pay ceiv : 97% re tats claims s s IP he blis oneer pu Pi Friends Provident buys Sesame and Pantheon s plaint n com io ion educt sr t protec in ce nnoun FOS a 26 ution deal apital wins £ 580 m Resol C w orro om LV buy T = to

june 2007 27

LV= slashes ritis B ts pro laces W an rep Kirw NU cu I at AB alsh Lloyds TSB pa ves wa rance Insu h nce rates e ch aun l c poli I PP h s Scotti on ale of s Abbey y ex table Equi ge r to a ve life co nds te Aeg PPI providers still putting prices up 28 n rate y for s term assura w s ne tectio Life 75

july 2007 29

ro for p n P pla I new es unch a eer l Pion ABI pro duces c HBOS lau nches ne 30 ls a ssion fe onsume w mortg r guide age prot on critic a l illness ection p lan

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 31

The Expert Panel • Nearly 80% response rate • Respondents included: THANK YOU! 32

Most significant developments (comments attracting five or more “votes”) 33

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 • FSA’s ICOB review • Increased reinsurance capacity for guaranteed CI 34

Successes/heroes (comments attracting five or more “votes”) 35

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! 36

Biggest challenges (comments attracting five or more “votes”) 37

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 38

What could we do better? (comments attracting five or more “votes”) 39

What could we do better? (other suggestions) • • 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 • 40 Recognise that a totally price-driven market is in no-one’s best interests Talk to customers!

New Business - Prospects 41

Number of providers - prospects 42

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 43

Somewhere along the way we stopped explaining “insurance” • There are two ways for individuals to make provision for future financial needs: Savings Insurance • Which offers greater benefit to society as a whole? • Which should the government encourage via tax incentives? • Where did we go wrong? 44

To regain trust we must understand 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. 45

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 46

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 47

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: • • 48 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

Looking ahead…. . “Things can only get better” 49

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