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Life Insurance is SOLD, not BOUGHT

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Life Conference Life Conference

Peter Temple and James Louw

Why do we undersell

© 2010 The Actuarial Profession www.actuaries.org.uk

Why do we undersell

our products?

Where did it all go wrong?

“Life Insurance is

SOLD, not BOUGHT”

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Value

• People don’t value life insurance for what it is worth

• People don’t value financial services brands

• People are sceptical about value for money from insurers

• Financial performance of the industry lags other products/industries

The result

800 900 200 300 400 500 600 700 800 -100

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Life insurance: uninteresting and unengaging

Consumer attitudes toward and involvement in life insurance 15% 26% 45% 58% 53% 44% 27% 21% 11% Satisfied with insurance providers

Feel loyal toward providers

Have a real interest in life insurance

Disagree strongly Agree somewhat Agree strongly

45% 33% 44% 49% 11% 18% Have a real interest in life insurance

Know a lot about life insurance

Source: Accenture Global Consumer Survey 2010. n=1300

It could get even harder

Attitudes about life insurance Gen Y b.1981-86

Gen X b.1965-80

Boomers b.1946-64

Most people need life insurance – agree 63% 75% 73%

Life insurance is the best protection – agree

60% 71% 71%

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How do you sell insurance if no desire to buy?

 Expensive distribution

o Advisors

o Direct mail

o TV advertising

o Pay to access potential customer

 Hard sell practices with reputational damage

 Product complexity to attempt differentiation

 Insurers have ceded the consumer to advisors & sales

 Claims ratios are at 50% and (sometimes much) lower

o We can debate “value”

o AAPL has a 40% margin

What about other industries?

 Value for money?

E i l l ?

 Emotional value?

 Simplicity

 But very cunning

 Obsessed about the client

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The Value of Innovation

Why has Apple done so well?

 Visionary leadership  Innovation  Innovation  Brilliant marketing  Emotive appeal  Complex product

 BUT really easy to use

 “Why can't we move life & disability insurance into a similar space?”

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Value

• I think we would all have a similar understanding of what someone means when they say “it was good value for someone means when they say it was good value for money”

• BUT

• We need to split this up into “economic value” and “emotional value”

The Economic Value of Insurance

• 35 year old male

• Non-smoker

• Best “class” of life

• United Kingdom (from moneysupermarket.com)

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The Economic Value of Insurance

• Die at age 85 “V l ” f i £ 28 398 • “Value” of premiums £ 28,398 • “Value” of claim £ 500,000 • HUGE WIN

The Economic Value of Insurance

• Die at age 85

P l f i £ 12 423

• Present value of premiums £ 12,423

• Present value of claim £ 70,356

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The Economic Value of Insurance

• Die age 45

P V l f i £ 4 691

• Present Value of premiums £ 4,691

• Present Value of claim £ 337,782

• Back to a BIG WIN again

The Emotional value of Insurance

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 Are we doing anything to help customers assess value?

 Is it value to pay claims quickly but allow a few to slip

th h th k ?

through the cracks?

 Is it value to target a cheap product?

 Is it value to have thorough underwriting (and lower premiums)?

 How can we argue we creating value when we allow cross subsidies in our pricing?

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Gen Re Consumer Survey

 Behaviour compared to other goods

R i 3 t i

 Run in 3 countries

 July to September 2011

Survey Results

These will be revealed at the Convention – come along to the session to see the results!

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Products

High Performance Insurer of the Future

 The consumerisation of IT

 Increasing risk and regulation

 Changing consumer behaviour

 Shifting competitive landscape

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What should we do differently?

• Work together to SELL the VALUE of insuranceg • Present complexity in a simple way

• Make sure your platform supports the CONSUMER

• Remove hurdles to purchase

• Differentiate you proposition in a meaningful way

• Ensure a fantastic claims experiencep

Questions or comments?

Expressions of individual views by members of The Actuarial Profession and its staff are encouraged.

The views expressed in this presentation are those of the presenter.

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Disclaimer

Thi t ti i t t d b i ht All th i f ti t i d i it h b

This presentation is protected by copyright. All the information contained in it has been very carefully researched and compiled to the best of our knowledge. Nevertheless, no responsibility is accepted for its accuracy, completeness or currency. In particular, this information does not constitute legal advice and cannot serve as a substitute for such advice. It may not be duplicated or forwarded without the prior consent of the Gen Re.

References

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