Wednesday 15 th June 2011

1. Bridging the Gap: How can greater demand for protection be generated? Wednesday 15th June 2011 “Grave Yard Slot”

2. 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?

3. 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?

4. 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

5. Would yourecommend LifeSearch to a friend or familymember?

6. The Protection Market – Latest ABI Stats

7. New Protection Policies Sold 2500 2300 2100 '000s 1900 1700 1500 2006 2007 2008 2009 2010 2011E Year

8. Premium Value of New Protection Policies Sold 1250 1200 1150 £ Millions 1100 1050 1000 2006 2007 2008 2009 2010 2011E Year

9. Premium Value of Whole of Life Policies Sold 150 125 100 75 £ Millions 50 25 0 2006 2007 2008 2009 2010 2011E Year

10. Premium Value of (Proper) Income Protection 60 58 56 54 52 £ Millions 50 48 46 44 42 40 2006 2007 2008 2009 2010 2011E Year

11. Spend by Category * Source: Life category in Nielsen Addynamix 2009 (Life Protection, Critical Illness, Term Assurance, Income Protection). * 2009 data Jan-May

12. The Consumer - What drives the protection gap? Are we dealing with a communications-led problem Or just another product people don’t need anymore?

14. Life Expectancy Trends

15. Male Mortality Trend

16. Female Mortality Trends

17. 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.

18. 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

19. 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?

20. 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?

21. 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!

22. Spend by Category * Source: Life category in Nielsen Addynamix 2009 (Life Protection, Critical Illness, Term Assurance, Income Protection). * 2009 data Jan-May

23. Occam’s Razor! 150 125 100 75 £ Millions 50 25 0 2006 2007 2008 2009 2010 2011E Year

24. Occam’s Razor! 150 ‘If two or more competing theories exist as to what causes a particular outcome, the simpler one is likely to be right” 125 100 75 £ Millions 50 25 0 2006 2007 2008 2009 2010 2011E Year

25. 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

26. 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

27. Research objectives Claimed ownership of insurance & protection cover by product / provider Awareness of insurance and protection product types available Four Key Objectives Consumer Awareness Consumer Understanding • What consumers understand by different product types • Claimed versus ‘proven’ basic levels of consumer understanding Market Segmentation • Consumer attitudes to insurance and protection to help derive a market segmentation for future targeting purposes 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

28. Awareness of insurance products Target Products Own product Aware but don’t own Ownership and Awareness Total Awareness 91% 90% 90% 88% TARGET PRODUCTS OWNED Population Mean – 1.3 87% 83% Significantly higher for: 78% Confused Policy Holders 1.8 71% 69% Disengaged Policy Holders 1.8 67% 62% 57% 46% 25%

29. Getting information about policies = significantly different vs. Total respondents (weighted) Claimed Sources of Information About Taking Out Insurance Disengaged Policy Holders Confused Policy Holders

30. Attitudinal segmentation Average number of policies owned* Average Below Average Above Average Five segments identified based on their attitudes towards insurance and protection NO NEED FOR INSURANCE CONFUSED POLICY HOLDERS 0.6 1.8 Population: 8.44 million Population: 14.07 million DISENGAGED POLICY HOLDERS SELF SUFFICIENTS 1.3 1.8 Population: 7.32 million Population: 9.01 million FINANCIALY STRAPPED 1.3 Population: 10.13 million *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

31. Key findings 1. Confused Policy Holders Recognise the importance of insurance cover but find policies complex and confusing 2. Disengaged Policy Holders Recognise the importance of insurance cover but not actively engaged due to reliance on others for security 3. Financially Strapped Don’t have other sources to rely on for security and have financial constraints to getting insurance cover 4. Self Sufficients Have other sources to rely on: savings, spouse's income and therefore don’t feel the need of getting insurance 5. No Need for Insurance Feel they don’t have much at stake and have other priorities to think about than getting insurance

32. Secondary Younger No Need Core Secondary Older Self Sufficient Self Sufficient Financially Strapped Financially Strapped Confused Disengaged *TGI Q2 2009

33. Communications objective Confusion Indifference “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” Virtuous Clarity

34. 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

35. Fire Authority of Northern Ireland

36. 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

37. 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

38. Can we break the sector down into manageable information/customer journeys? Life Critical illness Income protection Payment protection OR Home-owners Kids Jobs

39. 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

40. 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.

42. How can greater demand for protection be generated?

43. Occam’s Razor! 150 ‘If two or more competing theories exist as to what causes a particular outcome, the simpler one is likely to be right” 125 100 75 £ Millions 50 25 0 2006 2007 2008 2009 2010 2011E Year

44. 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.