Actuarial Society 2012 Convention

Transcription

1 Actuarial Society 2012 Convention Peter Temple Why do we undersell ourselves?

2 Where did it all go wrong?

3 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

4 The result FTSE : 300 Start NYSE : AAPL

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7 Life insurance: uninteresting and unengaging Consumer attitudes toward and involvement in life insurance Disagree strongly Agree somewhat Agree strongly Satisfied with insurance providers 15% 58% 27% Feel loyal toward providers 26% 53% 21% Have a real interest in life insurance 45% 44% 11% Know a lot about life insurance 33% 49% 18% Source: Accenture Global Consumer Survey n=1300

8 It could get even harder Attitudes about life insurance Gen Y b Gen X b Boomers b Most people need life insurance agree 63% 75% 73% Life insurance is the best protection agree 60% 71% 71% Source: LIMRA. Protecting the futures: life insurance and Gen X & Y, 2008

9 Perception of essential vs. luxury items over time Courtesy of Scottish Widows UK Protection Report 2012

10 Awareness of insurance Courtesy of Scottish Widows UK Protection Report

11 How do you sell insurance if no desire to buy? Expensive distribution Advisors Direct mail TV advertising 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 We can debate value AAPL has a 40% margin

12 What about other industries? Value for money? Emotional value? Simplicity But very cunning Obsessed about the client

13 The Value of Innovation

14 Why has Apple done so well? Visionary leadership Innovation Brilliant marketing Emotive appeal Complex product BUT really easy to use

15 Value I think we would all have a similar understanding of what someone means when they say it was good value for money BUT We need to split this up into economic value emotional value

16 The Economic Value of Insurance 35 year old male Non-smoker Best class of life United Kingdom (from moneysupermarket.com) 500,000 / (level term 50 years)

17 The Economic Value of Insurance Die at age 85 Value of premiums 28,398 Value of claim 500,000

18 The Economic Value of Insurance Die at age 85 Present value of premiums 12,423 Present value of claim 70,356

19 The Economic Value of Insurance Die age 45 Present Value of premiums 4,691 Present Value of claim 337,782

20 The Emotional value of Insurance We have to tap in the emotional side of insurance

21 The Emotional value of Insurance We have to tap in the emotional side of insurance

22 Questions to ask ourselves Are we doing anything to help customers assess value? Is it value to pay claims quickly but allow a few to slip 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?

23 What did we do?

24 Gen Re Consumer Survey Behaviour compared to other goods Run in 3 countries July to September 2011

25 Demographic Age Profile Household Type 40% 30% 20% 10% 0% Under age to to to to 64 Over age 64 60% 50% 40% 30% 20% 10% 0% P P + D S S + D 60% 40% 20% 0% Income AUS SA UK Lowest Medium Highest Non disclosed 100% 80% 60% 40% 20% 0% Occupation Fin Home Manual Office Light

26 What insurance do you have? 100% 90% 80% 70% 60% AUS SA UK 50% 40% 30% 20% 10% 0% Motor Home Health Life Disability

27 Do you know how much insurance you have? 20% 15% 10% 5% 0% Don't Know what I Have Don't Know what I am paying I intend to buy more in next 12 months

28 Top Financial Concerns 20% 15% 10% 5% 0%

29 Where would you spend extra disposable income? 40% 35% 30% 25% 20% 15% 10% 5% 0%

30 Reasons not to buy insurance 35% 30% 25% 20% 15% 10% 5% 0%

31 Products

32 Brand Loyalty 70% % Likely to buy the same brand 60% 50% 40% 30% 20% 10% 0% Car Car Ins PC Life Ins PMP TV In SA the brand loyalty for life Insurance is 38%

33 Brand Choice Range of Price for Life Insurance: UK 42% SA 24% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Ease of purchase Recommendation Features, Price, Brand Car TV PMP PC Car Ins Life Ins

34 Likely to recommend a brand 70% 60% 50% Personal recommendation is the most important factor to choose a brand for life insurance, and yet it is the commodity least likely to be recommended 40% 30% SA at 28% UK at 10% 20% 10% 0% Car PC Car Ins PMP TV Life Ins

35 Effectiveness of advertising - Effective 45% 40% 35% UK/AUS: 5% and 6% 30% 25% 20% 15% 10% 5% 0% Car Car insurance Computer Life insurance Portable music player Television

36 Understanding features - Easy 90% 80% 70% SA : 51% "easy" despite most complex products. 60% 50% 40% 30% 20% 10% 0% Car PMP TV PC Car Ins Life Ins

37 Ease of purchase - Easy 90% 80% UK: Lowest at 32% 70% 60% 50% 40% 30% 20% 10% 0% Portable music player Television Computer Car insurance Car Life insurance

38 Where would you start if buying insurance? 25% 20% 15% In SA: Phone Advisor highest - 27% In UK: Online Search highest - 27% 10% 5% 0%

39 How are you most likely to complete the transaction? 90% 80% (the evolution in distribution) AUS 70% 60% 50% 40% UK SA 30% 20% 10% 0% In person Mail Online Telephone Smartphone

40 What should we do differently? Present complexity in a simple way Make sure your platform supports the CONSUMER Remove hurdles to purchase Differentiate your proposition in a meaningful way Ensure a fantastic claims experience

41 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 The Actuarial Profession