The Protection Review Conference 11th July 2007, Café Royal

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

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…… Source: ABI

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

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

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

8. Are we making progress? Computer says “no”

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. Liverpool Victoria offers Red Arc services to all CI policyholders ABI launches new SOBP for PMI ABI says sales of life & pensions up 25% Scottish Equitable Protect research: “40% have false CI expectations” ABI launches member consultation on improving clarity in on-line and telephone applications for life and health protection insurances ABI launches PPI checklist FSA to consult on term assurance “age 70” rule

13. September/october 2006

14. GE Life sold to Swiss Re Axa buys Thinc Destini for £100m ABI supports abolition of “age 70” rule Liverpool Victoria updates Flexible Protection Plan using STP Standard Life buys stake in Simply Biz Pru turns against those IFAs that churn Royal Liver launches new CI product based on ABI standards FSA uncovers more PPI failings OFT refers PPI sector to Competition Commission Scottish Widows terminates ASDA partnership

15. November/december 2006

16. Unum Provident extends IP Plan to age 70 Kenny leaves ABI Income Protection Taskforce launches White Paper Standard Life re-launches IP product ABI changes SOBP cancer definitions ABI Income Protection Workshop: Towards 10 million satisfied customers

17. January 2007

18. LifeSearch tie up with ASDA FSA fines GE Capital Bank £610,000 for PPI failings “Tine’s Up At FSA” Treasury may revive PTA in a different format

19. february 2007

20. Repossessions hit six-year high FSA fines Capital One £175,000 for PPI misselling Treasury backtracks on PTA U-turn Legal & General buys Nationwide subsidiaries L&G sells PMI business to Axa OFT refers PPI market to Competition Commission for further investigation after public consultation Prudential: “£43.9m protection claims declined”

21. MARCH 2007

22. PPI refunds good for consumers, says FSA Liverpool Victoria re-brands as "LV=" Haddrill urges Balls on PTA L&G upgrades CI cover FSA makes case for PTA Budget: Government kills PTA Pru announces launch of PruLife (50/50 JV with Discovery) LV= takes equity stake in Lighthouse Group FSA ICOB Review: Interim Report published

23. april 2007

24. Royal London and Royal Liver in merger talks LV= and Bright Grey revamp CI cover GE Life re-brands as “Tomorrow” FSA scraps Age 70 rule BUPA revises CI product ABI consultation document on changes to PMI definitions PruHealth and Boots launch PMI on High Street BUPA confirms it may sell off hospitals Deadline for implementing ABI SOBP for CI Nick Kirwan quits Scottish Widows PTA pipeline deadline extended to 31 July

25. may 2007

26. Standard Life takes stake in threesixty Base rate hits 5.5% Pioneer publishes IP claims stats: 97% received payout in 2006 Friends Provident buys Sesame and Pantheon FOS announces reduction in protection complaints Capital wins £580m Resolution deal LV= to buy Tomorrow

27. june 2007

28. NU cuts protection rates Kirwan replaces Walsh at ABI Lloyds TSB paves way for sale of Abbey Life LV= slashes term assurance rates British Insurance launches new PPI policy Aegon Scottish Equitable extends life cover to age 75 PPI providers still putting prices up

29. julY 2007

30. Pioneer launches new IP plan for professionals ABI produces consumer guide on critical illness HBOS launches new mortgage protection plan

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!

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

34. 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

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

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”)

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”)

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 - Prospects

42. Number of providers - prospects

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

45. To regain trust we must understand and 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.

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. 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: • 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

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

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