Consequences of the commission ban in the Norwegian insurance market

1. Consequences of the commission ban in the Norwegian insurance market Ståle Frausing – Head of Broker & International Dept.Oslo, 22. June 2011

2. Vital- part of DnB NOR, Norway’s leading Bank Pre-tax operating profit before write-downs NOK million The DnB NOR Group's market capitalisation NOK billion • 2.300.000 retail bank customers • 200.000 corporate clients • Market leader in all main segments • 11.000 employees in Norway and 3.000 abroad • Specialized in Shipping, Energy and Sea-food abroad • * 1EUR=8NOK, 1USD=5,5NOK, 1GPB=9NOK

3. Vital • Norway’s largest provider of individual and group life insurance and pension savings • Life insurance • 1 million retail customers • 26 000 agreements with companies, municipalities and public enterprises

4. Our marketplace- Brokers operate solely in corporate market Personnel insurance > Workman Compensation, mandatory covers paid by employer > Group Life, standard cover in most industries> Limited demand for Health-Insurance Disability & Old Age Pension> 1 million Individuals in minimum mandatory DC-scheme > 1 million Individuals in medium/high-contribution DC-schemes or DB-schemes, Disability-cover is normally included.

5. Insurance brokers in Vital • 35% of the pension market and 60% of personal insurance is covered by brokers • Vital is doing business with 23 brokers of which “the big 4” represents 80% of the volume • The 3 largest brokers are international: AON, Willis and Mercer • Commission-ban was introduced in Norway in 2004 for non-life insurance and in 2007 for life-and pension-insurance.

6. Consequences of the commission ban • Providers introduced a 2-price system • Broker’s customers received a rebate representing provider's lower cost of service • Brokers started to bill their customers for their services - brokers' loyalty shifted from the provider to the customer • - increased competition between brokers focusing on brokers ability to - give administrative relief for customers - consulting in connection with customers EB program - achieve lower prices

7. Brokers' business model - professionalism • Commision ban has not yet led to structural changes in the industry, but the business models has been greatly professionalized • Several firms focuses less on day-to-day value chain and more at high-value- consulting: - running tenders - renegotiates rates - adapt and change pension plans, such as the transition from DB to DC • Billing Models: a) Basic solutions covering access / x-consulting hours + tender every x year • b) Basic solutions + separate pricing of transformation from DB to DC, change and tender • c) Basic + profit-share linked to price decrease • Most brokers have managed this adaptation in a good way. AON delivered a verygood 2010 with 20% profit margin.

8. Vital customers:What matters most to your business when choosing a pension provider? 150+ employees mentioned # 1 important mentioned # 2 important mentioned # 3 important mentioned # 4 important good prices good returnon assets undermgt. good advice &consulting efficient customer service

9. Consequences For customers: The former brokers were well paid in the form of comission from suppliers without necessarily doing a good job for the customer. Now we have brokers working for the customers and they are depending of showing their value - otherwise they will loose the client to other brokers.- better consulting- lower cost of pension and personnel insurance For providers: Previously, we lived well in a sheltered competitive climate. Today we are experiencing very strong competition where the market is highly price focused as a result of the brokers need to show value to his client.- pressure on margins / pricetariffs / underwriting- need to cut costs to maintain earnings

10. Thank you!