Meeting Consumer Healthcare Needs

1. Meeting Consumer Healthcare Needs Jackie Wells 7th October 2003

2. Presentation Structure • What factors are driving consumer change? • How are consumers changing? • What does this mean for healthcare products? • How well is the industry responding to these needs? • Future opportunities and potential market gaps?

3. Pension Reform Employer attitudes Govt. Policy Forces re-shaping consumer view Consumerism Working Patterns Demographics

4. Government Policy – Healthcare Reform • “Health of the nation” policy • NHS Performance • Increased budget • Informed choice • Visible improvements? “If the NHS is not basically fixed by the next election, then I am quite happy to suffer the consequences. I am quite willing to be held to account by the voters if we fail”. Tony Blair Tony Blair, January 2002

5. Government Policy - Indirect • Focusing on three pillars of welfare • work and skills, income and public services • “Savings and Assets for all” - Benefits of savings • Independence through their lives • Security if things go wrong • Comfort in old age • Asset based welfare – benefits to wealth and health • Increase educational attainment • Ageism policies • Informed Choice agenda • Support for Equity Release

6. Regulatory Approach • FSA regulation likely to bring industry under focus • Sales process more complex • LTC prohibitively so? • Scope for misselling claims • Fewer brokers / intermediaries? • Future government intervention in product design? • Stakeholder healthcare insurance?

7. Working Patterns • Low unemployment and increased job flexibility • Leading to change of mindset for protection • Noticeable shift in emphasis • away from complex plans to simple • away from insurance to self-fund • Widespread recognition of need to generate ‘income’ in periods of unemployment • from insurance or own savings • Self-employment / contract work viewed by some as form of protection from changes in working patterns

8. Demographics • Increasing uncertainty in employment patterns • Growth of single households • Awareness of ageing • Baby Boomer demands and expectations • NHS ageism? • Is ageing population really the burden it seems?

9. Consumerism • Clear evidence of growing consumer interest in health • Comparative information likely to fuel trend for “consumer oriented” behaviour and approach to the NHS • Recognition of reduced future role for Government “As people’s expectations rise and their income follows suit, they will demand more power and flexibility over the manner in which they and their families are treated” John Reid

10. Consumerism - Awareness • Media • NHS crisis coverage • Men’s Health, Health Which?, Discovery Health Channel etc, • School initiatives – “Wired for Health”, “Healthy Schools Programme” • League tables • Retailers • Health clubs • Internet “a first step towards giving the public hard information about the performance of every doctor and the right to chose between them”.

11. Consumers - Wealth Wealth Source: Wealth & Portfolio Choice 2002

12. Employer mindset changing • Economic pressures allied to new working patterns • Decline in traditional ways of providing benefits • Leading to decline in paternalism • New approach characterised by facilitation • Handing control to employee • Providing choice and flexibility • Increase in lifestyle benefits • Financial drivers leading to transfer of risk to employee

13. Trends in employee benefits Traditional benefits DC Pension GPPP Stakeholder DB Pension Life Cover PHI PMI Employee Risk Employer Risk Car Allowance Childcare Health club Company Car Training / education Lifestyle benefits Source: Deloitte research

14. Pension Reform • Next few years will bring significant change • Shift to emphasis on the individual • Providers gearing up to providing packaged solutions to pensions and savings • Bypassing traditional intermediaries • Education and information at heart of new solutions • Value will lie in controlling the portal to the employer • Protection benefits sit within portal

15. Presentation Structure • What factors are driving consumer change? • How are consumers changing? • What does this mean for healthcare products? • How well is the industry responding to these needs? • Future opportunities and potential market gaps?

16. Consumer mindsets are changing Two distinct mindsets: • Find a New Nanny • Take Control

17. Find a New Nanny • Traditional response to market • Supported by industry view of consumer • Supported by complex product structures • Supported by intermediary behaviour • Protection comes in guise of: • Advisor • Big brand • Regulator • Employer

18. Take Control • Rapidly emerging behaviour • Information not advice at heart of decision making • Lack of trust in formal channels • Supported by government and regulator • Current response is to reject industry solutions • Protection comes in guise of: • Understanding products and services • Making own decisions • Using experts where add value

19. Find a New Nanny Employer central to decision Group schemes succeed Consumer held at arms length Transparency not required Complexity supported Take Control Individual makes decision Individual controls contract Consumer perspective imperative to success Simplicity and comparative information critical Implications for Healthcare

20. Presentation Structure • What factors are driving consumer change? • How are consumers changing? • What does this mean for healthcare products? • How well is the industry responding to these needs? • Future opportunities and potential market gaps?

21. Guilt free Consumers increasingly looking for…

22. Guilt free Flexibility Consumers increasingly looking for…

23. Guilt free Flexibility Simplicity Consumers increasingly looking for…

24. Guilt free Flexibility Simplicity Certainty Consumers increasingly looking for…

25. Guilt free Flexibility Simplicity Certainty Affordability and VFM Consumers increasingly looking for…

26. Presentation Structure • What factors are driving consumer change? • How are consumers changing? • What does this mean for healthcare products? • How well is the industry responding to these needs? • Future opportunities and potential market gaps?

27. Industry struggling to deliver - Stigma remains Some flexibility Perceived complexity Increasing / renewable premiums Expensive / Unclear value

28. But some positive signs - Stigma remains • Choice between NHS and private • Government changes will ease • Growth in self-pay will change attitudes

29. ….. positive signs - Some flexibility • Menu approach - tailor / choose level of cover • Employers offering flexible benefits

30. ….. positive signs - Perceived complexity • Growth of cash-plans • Standardised critical illness definitions

31. ….. positive signs - • Long term pricing (fixed price policies) • Budget plans • Healthy life style rewarded Increasing / renewable premiums

32. ….. positive signs - • No claims bonuses • High excess or personal funding • Information, advice and support Expensive / Unclear value

33. Presentation Structure • What factors are driving consumer change? • How are consumers changing? • What does this mean for healthcare products? • How well is the industry responding to these needs? • Future opportunities and potential market gaps?

34. Future Challenges • Making healthcare plans affordable • Education of consumers • Comparative Information / standardisation • Providing certainty of cover for long term contracts • Fit with NHS / state benefits • Shift from traditional group plans to individual • Access for new collectives?

35. Future Opportunities • PMI – High Excess, Simplification, Transparency • CI – As part of menu of lifestyle benefits • Income Protection – Education, Simplification, Affordability, Access, Medium Term • LTC – Managing assets, Point of need, Information

36. Meeting Consumers’ Needs in Healthcare Jackie Wells 7th October 2003