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Good afternoon ladies and gentlemen

Rita
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Good afternoon ladies and gentlemen

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    1. Good afternoon ladies and gentlemen

    4. This slide shows the breakdown between life and non life premium income in million euros, so that we can see there was 7979.7 M euro spent in 2004 on life premiums with 3933.6 M euro spent on non life premium, giving a total of 11,863.3 M euro, and in terms of GDP, these premiums for life represented 5.34% of GDP, 2.65% for non life, giving a total insurance premium income of 7.99 % of GDP. whilst Premiums per capita were 2024 euro per head on life business and 1004 on non life business, giving a total of 3028 euro per head spent by Irish people on insurance products. This slide shows the breakdown between life and non life premium income in million euros, so that we can see there was 7979.7 M euro spent in 2004 on life premiums with 3933.6 M euro spent on non life premium, giving a total of 11,863.3 M euro, and in terms of GDP, these premiums for life represented 5.34% of GDP, 2.65% for non life, giving a total insurance premium income of 7.99 % of GDP. whilst Premiums per capita were 2024 euro per head on life business and 1004 on non life business, giving a total of 3028 euro per head spent by Irish people on insurance products.

    5. In looking at this five year trend we can see there was a significant fall in life assurance business between 2001 and 2002, with the increase in 2004 volumes only bringing total sales back to 2000 levels; and while non life premiums increased somewhat between 2000 and 2003, the fall in non life premium income in 2004 returned the market to 2002 levels. Over the 5 years, life premium income has just shown a very slightly increase from 7601 Million Euro in 2000 to 7930 Million euro in 2004 - an increase of an average of 1.1% per annum. In looking at this five year trend we can see there was a significant fall in life assurance business between 2001 and 2002, with the increase in 2004 volumes only bringing total sales back to 2000 levels; and while non life premiums increased somewhat between 2000 and 2003, the fall in non life premium income in 2004 returned the market to 2002 levels. Over the 5 years, life premium income has just shown a very slightly increase from 7601 Million Euro in 2000 to 7930 Million euro in 2004 - an increase of an average of 1.1% per annum.

    6. This slide depicts the trend in premium income as a percentage of GDP, again broken down between life and non life premiums. We can see that there has been a significant downward trend over the past 5 years in premium income as a percentage of GDP. In 2000, premium income accounted for 10% of GDP but this has fallen to 8% in 2004. Life premiums as a percentage of GDP have averaged 5.6% for each of the last three years, nearly two percentage points lower than the 7.4% level in 2000. This slide depicts the trend in premium income as a percentage of GDP, again broken down between life and non life premiums. We can see that there has been a significant downward trend over the past 5 years in premium income as a percentage of GDP. In 2000, premium income accounted for 10% of GDP but this has fallen to 8% in 2004. Life premiums as a percentage of GDP have averaged 5.6% for each of the last three years, nearly two percentage points lower than the 7.4% level in 2000.

    7. This slide looks at the premium per capita in 2004 in US$ that a variety of the developed countries spend on insurance products – of particular interest to us today would be the comparison between Ireland and Italy, with Ireland nearing the top of the league for spending at 4091, only exceeded by the UK and Switzerland. Italy by contrast spends significantly less per head of population, which no doubt is explained by market development and the nature of the insurance industry in Italy over the years. This slide looks at the premium per capita in 2004 in US$ that a variety of the developed countries spend on insurance products – of particular interest to us today would be the comparison between Ireland and Italy, with Ireland nearing the top of the league for spending at 4091, only exceeded by the UK and Switzerland. Italy by contrast spends significantly less per head of population, which no doubt is explained by market development and the nature of the insurance industry in Italy over the years.

    8. This slide, although it conflicts somewhat with the previous slides showing insurance premiums as a percentage of GDP for Ireland does give us a view of how we compare worldwide – in terms of US $ - so that Ireland’s insurance premiums as a percentage of GDP show similarities with the major developed regions of the world Sources: Swiss Re Sigma World Insurance Report No 2/2005; CSO and IIF This slide, although it conflicts somewhat with the previous slides showing insurance premiums as a percentage of GDP for Ireland does give us a view of how we compare worldwide – in terms of US $ - so that Ireland’s insurance premiums as a percentage of GDP show similarities with the major developed regions of the world Sources: Swiss Re Sigma World Insurance Report No 2/2005; CSO and IIF

    9. This slide shows the 2004 Key Life Assurance statistics This slide shows the 2004 Key Life Assurance statistics

    10. This slide shows the breakdown in the Life and Pensions sector of Annual Premium Business, All Business, New Business and Single Premium Business and the trend from 2000 to 2004. Over the five years, Annual Premium business increased from 2378 M euro to 3972 M Euro, an average of 13.7% per annum. All Business income fell in 2001 but recovered since, with an increase over the period 2000 to 2004 from 7601 M euro to 7930 M euro - up 1.1% per annum on average. New Annual premium business increased continuously and strongly by an average rate of 21.1% per annum from 2000 to 2002 but the significant fall in 2003 and recovery in 2004 meant that the annual average growth for the five years period ws only 4.5%. Single premium business decreased between 2000 and 2002, with an increase in 03 and 04, but overall over the fives years shows an average decrease of 6.7% per annum. This slide shows the breakdown in the Life and Pensions sector of Annual Premium Business, All Business, New Business and Single Premium Business and the trend from 2000 to 2004. Over the five years, Annual Premium business increased from 2378 M euro to 3972 M Euro, an average of 13.7% per annum. All Business income fell in 2001 but recovered since, with an increase over the period 2000 to 2004 from 7601 M euro to 7930 M euro - up 1.1% per annum on average. New Annual premium business increased continuously and strongly by an average rate of 21.1% per annum from 2000 to 2002 but the significant fall in 2003 and recovery in 2004 meant that the annual average growth for the five years period ws only 4.5%. Single premium business decreased between 2000 and 2002, with an increase in 03 and 04, but overall over the fives years shows an average decrease of 6.7% per annum.

    12. This slide shows the variation in investment strategy of life companies over the five year period between different asset classes. In 2000, equities represented 53.6% of total funds invested, peaking in 2003 at 58.1? and falling back in 2004 to 52.6%. Gilts represented 27.7% of funds in 2000, dropping significantly in 2001 - 2003, but rising sharply in 2004 to 29% of funds invested. And interestingly enough, property, much favoured by individual investors, decreased from 8.9% of funds in 2000 to 7.1% of funds in 2004, having reached its peak in 2002 at 10.1% of funds. This slide shows the variation in investment strategy of life companies over the five year period between different asset classes. In 2000, equities represented 53.6% of total funds invested, peaking in 2003 at 58.1? and falling back in 2004 to 52.6%. Gilts represented 27.7% of funds in 2000, dropping significantly in 2001 - 2003, but rising sharply in 2004 to 29% of funds invested. And interestingly enough, property, much favoured by individual investors, decreased from 8.9% of funds in 2000 to 7.1% of funds in 2004, having reached its peak in 2002 at 10.1% of funds.

    13. Now we come to the breakdowns of the sources of business between different categories of distribution, I.e. brokers, agents, tied agents, employees and direct sales forces To start with brokers – this chart shows the trend in AP life and Pensions and SP life and pensions from 2001 to 2004. Brokers new Business market share decreased by 3 percentage points to 55% in 2004 for Annual Premium Business but their share of single premium business recovered significantly to 60% from 53% in 2003. The trend is downward in 2004 for AP life but up 50% over the 4 year period, steady in 2004 vs. 03 for AP pensions, but again significantly increased over the 4 year period from 25% of market share to 43% On the SP Life side,the trend is down significantly over the period 2001 to 2004 – 34% of market share in 2001, 26% in 2004 but generally steady in SP pensions 32% in 01 – 34% in 04. Now we come to the breakdowns of the sources of business between different categories of distribution, I.e. brokers, agents, tied agents, employees and direct sales forces To start with brokers – this chart shows the trend in AP life and Pensions and SP life and pensions from 2001 to 2004. Brokers new Business market share decreased by 3 percentage points to 55% in 2004 for Annual Premium Business but their share of single premium business recovered significantly to 60% from 53% in 2003. The trend is downward in 2004 for AP life but up 50% over the 4 year period, steady in 2004 vs. 03 for AP pensions, but again significantly increased over the 4 year period from 25% of market share to 43% On the SP Life side,the trend is down significantly over the period 2001 to 2004 – 34% of market share in 2001, 26% in 2004 but generally steady in SP pensions 32% in 01 – 34% in 04.

    14. The picture for agents in Ireland is of a very small share of the SP and SP life and pensions market and one which at best is static for AP and declining for SP businessThe picture for agents in Ireland is of a very small share of the SP and SP life and pensions market and one which at best is static for AP and declining for SP business

    15. This next few slides are I suppose of particular interest to PIBA members, with our background in seeking agency agreements to protect the independence of brokers and assistance to intermediaries to resist the lure of tying to providers to try to ease the burden of compliance. On the AP side, tied agents have seen their share of the market decline steadily between 2001 and 2003, but only a slight recovery in 2004, overall there has been a decline of 37% in their market share of AP new Business. And on the SP side the decline has continued from 2002 onwards, with a 40% decrease in SP new business over 3 yearsThis next few slides are I suppose of particular interest to PIBA members, with our background in seeking agency agreements to protect the independence of brokers and assistance to intermediaries to resist the lure of tying to providers to try to ease the burden of compliance. On the AP side, tied agents have seen their share of the market decline steadily between 2001 and 2003, but only a slight recovery in 2004, overall there has been a decline of 37% in their market share of AP new Business. And on the SP side the decline has continued from 2002 onwards, with a 40% decrease in SP new business over 3 years

    16. By contrast, life office employees and company representatives (DSF) saw a dramatic recovery in their share of AP new business, up 100% from 10% in 2003 to 20% in 2004 (but down from a 2001 high of 34%) And on the SP side there has been a strong increase over the period with market share from 2001 to 2004 increasing by 133% from 9% of New Business in 2001 to 21% in 2004. By contrast, life office employees and company representatives (DSF) saw a dramatic recovery in their share of AP new business, up 100% from 10% in 2003 to 20% in 2004 (but down from a 2001 high of 34%) And on the SP side there has been a strong increase over the period with market share from 2001 to 2004 increasing by 133% from 9% of New Business in 2001 to 21% in 2004.

    17. These figures cover direct sales other than through employed salespeople e.g. telephone, internet and direct response sales. After a surge in 2003, market share has decreased significantly between 2003 and 2004, but over the whole period is showing significant increases in both AP New Business and SP new BusinessThese figures cover direct sales other than through employed salespeople e.g. telephone, internet and direct response sales. After a surge in 2003, market share has decreased significantly between 2003 and 2004, but over the whole period is showing significant increases in both AP New Business and SP new Business

    18. Whilst brokers continue to dominate the AP and SP new Business distribution channel, it can be seen that DSF market share is continuing to increase with tied agents also showing significant gains over the period, but with a relatively sharp decrease during 2004Whilst brokers continue to dominate the AP and SP new Business distribution channel, it can be seen that DSF market share is continuing to increase with tied agents also showing significant gains over the period, but with a relatively sharp decrease during 2004

    19. While doing the research for this presentation, I came across an interesting summary document of a predictive piece of work on the European Life and Pensions Distribution channels for the period 2005 – 2009, prepared by Datamonitor. In Europe, Banks are currently the largest distributors of life and pensions products with a 32% share of the market. By contrast in Ireland, Ark Life had a 10.3% share of the market in 03, dropping to 8.4% in 04. However, Bank of Ireland Life, which acquired New Ireland assurance saw their share of the market increase from 17.6% in 03 to 21.6% in 04. Datamonitor feel that the trend will be for bancassurance to increase in Ireland. By contrast, you can see that in Italy, the banks dominate the life and pensions market but it is predicted that as more complex pensions product become available, banks will lose market share to Italian agents. While doing the research for this presentation, I came across an interesting summary document of a predictive piece of work on the European Life and Pensions Distribution channels for the period 2005 – 2009, prepared by Datamonitor. In Europe, Banks are currently the largest distributors of life and pensions products with a 32% share of the market. By contrast in Ireland, Ark Life had a 10.3% share of the market in 03, dropping to 8.4% in 04. However, Bank of Ireland Life, which acquired New Ireland assurance saw their share of the market increase from 17.6% in 03 to 21.6% in 04. Datamonitor feel that the trend will be for bancassurance to increase in Ireland. By contrast, you can see that in Italy, the banks dominate the life and pensions market but it is predicted that as more complex pensions product become available, banks will lose market share to Italian agents.

    20. Datamonitor also state the overall in Europe, independent financial advisors hold 13% of the life and pensions market (2004), whilst some other research indicated that in Italy this figure is 21% (2002) and in Ireland Datamonitor estimate that brokers hold 40% of the market. This contrasts with 65% in the UK. Datamonitor predict a rapid 22% growth is forecast in the independent channel to the year 2009, as regulatory recognition and customer demand for choice boosts the market for impartial financial advice.   However, European regulation will present a major challenge to financial intermediaries in Europe and professional indemnity and capital adequacy requirements are forecast to put 30% of financial advisers out of business.   Agents, advisers and remote channels look set to take over from bancassurers as the fastest growing channel in European life and pensions distribution market and the growth of private pensions in Europe is set to have an important effect on the shape of the distribution market over the next 5 years. Datamonitor also state the overall in Europe, independent financial advisors hold 13% of the life and pensions market (2004), whilst some other research indicated that in Italy this figure is 21% (2002) and in Ireland Datamonitor estimate that brokers hold 40% of the market. This contrasts with 65% in the UK. Datamonitor predict a rapid 22% growth is forecast in the independent channel to the year 2009, as regulatory recognition and customer demand for choice boosts the market for impartial financial advice.   However, European regulation will present a major challenge to financial intermediaries in Europe and professional indemnity and capital adequacy requirements are forecast to put 30% of financial advisers out of business.   Agents, advisers and remote channels look set to take over from bancassurers as the fastest growing channel in European life and pensions distribution market and the growth of private pensions in Europe is set to have an important effect on the shape of the distribution market over the next 5 years.

    21. Before the change in our compliance regime, the situation was that there was a non binding recommendation which required some basic professional requirements and a limited form of registration e.g. in Ireland, (1) all intermediaries had to pass a basic foundation insurance exam, which was a multiple choice type exam requiring basic knowledge. (2) brokers and intermediaries had to register with the Irish Insurance Compliance Bureau as to their status, e.g. tied agent, agent, or broker (5+ agencies) and affirm that they would comply with rules such as informing of agencies held, issuing receipts as required, maintaining a separate client account, etc. There was no direct cost to the broker for the IICB and the only compulsory fee was due to the Director of Consumer Affairs, who regulated mortgages, so that mortgage brokers had to pay an annual licence.   PI was not compulsory nor were there consumer guarantee funds. Before the change in our compliance regime, the situation was that there was a non binding recommendation which required some basic professional requirements and a limited form of registration e.g. in Ireland, (1) all intermediaries had to pass a basic foundation insurance exam, which was a multiple choice type exam requiring basic knowledge. (2) brokers and intermediaries had to register with the Irish Insurance Compliance Bureau as to their status, e.g. tied agent, agent, or broker (5+ agencies) and affirm that they would comply with rules such as informing of agencies held, issuing receipts as required, maintaining a separate client account, etc. There was no direct cost to the broker for the IICB and the only compulsory fee was due to the Director of Consumer Affairs, who regulated mortgages, so that mortgage brokers had to pay an annual licence.   PI was not compulsory nor were there consumer guarantee funds.

    22. The EU Intermediation Directive 2000/92 Its effects on brokers / agents & companies

    23. The EU Intermediation Directive 2000/92 Its effects on brokers / agents & companies

    24. The EU Intermediation Directive 2000/92 Its effects on brokers / agents & companies

    25. The EU Intermediation Directive 2000/92 Its effects on brokers / agents & companies

    26. The EU Intermediation Directive 2000/92 Its effects on brokers / agents & companies   In Ireland prior to the directive, all intermediary categories, e.g. tied agents, agents (less than 5 agency agreements) and brokers (5 + agency agreements) could all comment in general terms on other providers insurance contracts, within the capacity of their knowledge and brokers were seen to offer independent advice. Now neither the agent nor the multi agency intermediary can comment on any product of a producer with whom they do not have an agency. Only the authorised adviser, who may or may not have agencies with product producers, can still advise on other companies products, but must have made an analysis of these products in accordance with some professional criteria. These elements within the directive and certainly how they have been implemented within Ireland cause a split between intermediaries who are positioned as ‘agents’ of one or more companies, and intermediaries who are ‘advisers’ and give a ‘fair analysis’ of the market. It is interesting to note that the IMD does not include these types of categorisation and in effect in Ireland at the moment while the IMD is supposedly generally in operation, in fact we are still operating under the Investment Intermediaries Act and it is possible that under the promised consolidation of Financial Services Regulation, the current categories of advisor may be revised.   In Ireland prior to the directive, all intermediary categories, e.g. tied agents, agents (less than 5 agency agreements) and brokers (5 + agency agreements) could all comment in general terms on other providers insurance contracts, within the capacity of their knowledge and brokers were seen to offer independent advice. Now neither the agent nor the multi agency intermediary can comment on any product of a producer with whom they do not have an agency. Only the authorised adviser, who may or may not have agencies with product producers, can still advise on other companies products, but must have made an analysis of these products in accordance with some professional criteria. These elements within the directive and certainly how they have been implemented within Ireland cause a split between intermediaries who are positioned as ‘agents’ of one or more companies, and intermediaries who are ‘advisers’ and give a ‘fair analysis’ of the market. It is interesting to note that the IMD does not include these types of categorisation and in effect in Ireland at the moment while the IMD is supposedly generally in operation, in fact we are still operating under the Investment Intermediaries Act and it is possible that under the promised consolidation of Financial Services Regulation, the current categories of advisor may be revised.

    27. The EU Intermediation Directive 2000/92 Its effects on brokers / agents & companies

    28. The EU Intermediation Directive 2000/92 Its effects on brokers / agents & companies

    29. The EU Intermediation Directive 2000/92 Its effects on brokers / agents & companies However, although these are key differences between MAIs/Agents and Authorised Advisors, there are broader principles in operation which apply to all intermediaries, i.e. Ø     Abiding by the relevant code of conduct for your status Ø     General Supervisory Requirements Ø     Advertising Requirements Ø     Books and Records Requirements Status Disclosure Requirements In addition, there are detailed provisions on the taking of referrals and the handling of complaints. All intermediaries are under obligation to act to the Clients Best Advantage and there is a clearly defined process of how an intermediary must deal with a client at all stages of their interaction. So looking at how we must now deal with clients…this is a general outline of the process involvedHowever, although these are key differences between MAIs/Agents and Authorised Advisors, there are broader principles in operation which apply to all intermediaries, i.e. Ø     Abiding by the relevant code of conduct for your status Ø     General Supervisory Requirements Ø     Advertising Requirements Ø     Books and Records Requirements Status Disclosure Requirements In addition, there are detailed provisions on the taking of referrals and the handling of complaints. All intermediaries are under obligation to act to the Clients Best Advantage and there is a clearly defined process of how an intermediary must deal with a client at all stages of their interaction. So looking at how we must now deal with clients…this is a general outline of the process involved

    30. The EU Intermediation Directive 2000/92 Its effects on brokers / agents & companies In terms of business process, there are also detailed provision as to what types of books and records an advisor needs to keep, regardless of whether they are MAIs or Aas, and in general terms this has significantly added to the administrative burden of all intermediaries. The following are the types of files that need to be kept:In terms of business process, there are also detailed provision as to what types of books and records an advisor needs to keep, regardless of whether they are MAIs or Aas, and in general terms this has significantly added to the administrative burden of all intermediaries. The following are the types of files that need to be kept:

    31. The EU Intermediation Directive 2000/92 Its effects on brokers / agents & companies

    32. The EU Intermediation Directive 2000/92 Its effects on brokers / agents & companies   In its implementation, it seeks to professionalize the business of the intermediary and to re-engineer the relationship between the intermediary and their client.   .   There are also direct financial implications for all intermediaries in that they must pay a levy to the Financial Regulator and must also contribute to the Investor Compensation Company and under the IMD all intermediaries must possess Professional Indemnity cover of €1500000 with effect from January 05. Another financial implication is the cost of auditing and 6 monthly accounts.   There is also a requirement that intermediaries will possess knowledge and ability as determined by the home state. In Ireland, this is likely to be the QFA Adviser’ which has four modules and is assessed by examination, and requires ongoing continuous professional development, e.g. 40 hours p.a., post qualification. Insurance companies may offer seminars which qualify for the CPD requirement and may assist intermediaries through seminars to obtain the QFA. However, this requirement will have practical implications for intermediaries and it is worth noting that    In conclusion, the cost of being in business for intermediaries will be higher going forward and there is likely to be However, as already suggested, it is likely that the independent advisor will retain significant market share, as consumers have a greater need for advice and choice. In tandem with this, advisors will have to operate in a visibly professional way – to quote the Central Bank of old, “if its not written down, it did’nt happen”, and transparency will be advanced in that the customer will have to be aware of the type of advisor they’re dealing with, and advice in general will become more formalised. Despite this, we can see that the trend in Ireland for the independent channel is strong and as we have all said in the past, brokers are a resiliant bunch and I have no doubt that while the future may be much more complex, brokers in Ireland will continue to thrive into the future.         In its implementation, it seeks to professionalize the business of the intermediary and to re-engineer the relationship between the intermediary and their client.   .   There are also direct financial implications for all intermediaries in that they must pay a levy to the Financial Regulator and must also contribute to the Investor Compensation Company and under the IMD all intermediaries must possess Professional Indemnity cover of €1500000 with effect from January 05. Another financial implication is the cost of auditing and 6 monthly accounts.   There is also a requirement that intermediaries will possess knowledge and ability as determined by the home state. In Ireland, this is likely to be the QFA Adviser’ which has four modules and is assessed by examination, and requires ongoing continuous professional development, e.g. 40 hours p.a., post qualification. Insurance companies may offer seminars which qualify for the CPD requirement and may assist intermediaries through seminars to obtain the QFA. However, this requirement will have practical implications for intermediaries and it is worth noting that    In conclusion, the cost of being in business for intermediaries will be higher going forward and there is likely to be However, as already suggested, it is likely that the independent advisor will retain significant market share, as consumers have a greater need for advice and choice. In tandem with this, advisors will have to operate in a visibly professional way – to quote the Central Bank of old, “if its not written down, it did’nt happen”, and transparency will be advanced in that the customer will have to be aware of the type of advisor they’re dealing with, and advice in general will become more formalised. Despite this, we can see that the trend in Ireland for the independent channel is strong and as we have all said in the past, brokers are a resiliant bunch and I have no doubt that while the future may be much more complex, brokers in Ireland will continue to thrive into the future.

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