The Marketing & Servicing of Short Term Business Direct or Intermediary?

1. The Marketing & Servicing of Short Term BusinessDirect or Intermediary? IISA Conference – Sun City 10th – 12th June 2012 Perspective by : Guy Scott CEO Aon Risk Solutions Aon South Africa (Pty) Ltd) | Aon Risk Solutions Proprietary & Confidential) | IISA Sun City Conference 10th – 12th June 2012

2. Agenda • Market dynamics • A place for both • The Customer/Consumer • Evolution of social media driving consumer behavior • Professionalism of our Industry • Concluding remarks • Q&A – audience participation Aon South Africa (Pty) Ltd) | Aon Risk Solutions Proprietary & Confidential) | IISA Sun City Conference 10th – 12th June 2012

3. Consumer triangle Aon South Africa (Pty) Ltd) | Aon Risk Solutions Proprietary & Confidential) | IISA Sun City Conference 10th – 12th June 2012

4. Consumer drivers Buying indicators (commoditised business): • Simplicity and transparency. • Value clearly demonstrated, reflecting a balance between price, product features and that product is right for their needs. • Buying process convenient and transparent to enable purchasing with confidence. • Service delivery against expectations. • Factual advice • Exceptional claims service Buying indicators (mid market): • Simplicity and transparency. • All of the above and advice using judgment • Bespoke broking Aon South Africa (Pty) Ltd) | Aon Risk Solutions Proprietary & Confidential) | IISA Sun City Conference 10th – 12th June 2012

5. A Case for Intermediation • McDonalds – “hot coffee law suit” • Liability Matter : Liebeck v Mc Donald’s Restaurants • Compensatory Damages – R 1.6m • Punitive Damages – R 21.6m Total Claim – R23.2m What liability limits and spectrum of cover do SA franchised operations have? Will they get the requisite advice in terms of liability cover going direct? Will a proper risk analysis be done? What is the impact on brand and how do you mitigate this risk? Aon South Africa (Pty) Ltd) | Aon Risk Solutions Proprietary & Confidential) | IISA Sun City Conference 10th – 12th June 2012

6. Professionalism – The FAIS Act • Market conduct legislation – the financial services market in its entirety • Codes of conduct amongst other things include: • Avoidance of fraudulent and misleading advertising, canvassing and marketing • Certain direct markets are practicing undesirable business practices • Giving advice which incorporates the exercising of judgment • Make a recommendation • Provide guidance • Provide a proposal • Differentiated from factual advice • Most intermediary’s provide a combination of both intermediary service and advice • Higher level of competency in the intermediary model through registered key individuals and representatives • Continuous professional development Aon South Africa (Pty) Ltd) | Aon Risk Solutions Proprietary & Confidential) | IISA Sun City Conference 10th – 12th June 2012

7. Professionalism – Unethical Business Practice • - Last Tango Advert “Cut out the middleman” • Undesirable business practice in terms of Section 34 of the FAIS Act: • Registrar needs to consider the following: • Harming the relationship between FSP’s or any FSP or category of FSP’s, and clients or the general public.  • Unreasonable prejudice to clients.  • Deceiving any client.  • Unfairly affecting any client.  • Continuation will defeat one or more of the objectives of the FAIS Act.  The business practice must have, or is likely to have, a direct or indirect effect resulting in: Aon South Africa (Pty) Ltd) | Aon Risk Solutions Proprietary & Confidential) | IISA Sun City Conference 10th – 12th June 2012

8. Advantages of Intermediation • Significant product knowledge • Pricing awareness • Independence • Affordability • Knowledge of emerging risks - risks are changing • Market leverage • Innovation • Qualified skills – KI’s and reps • Specialist knowledge • Client centric • Broad spectrum of choice • Claims advocacy • Trusted advisor – no vested interests Aon South Africa (Pty) Ltd) | Aon Risk Solutions Proprietary & Confidential) | IISA Sun City Conference 10th – 12th June 2012

9. Concluding Remarks • A place for both – SA will remain a strong intermediated channel. • Market share will stabilise at the global average of 75/25 in favor of the intermediated channel. • The shift in market share will be determined by which channel adapts to market forces quickest. • Professionalism and ethical standards should be consistently applied – direct markets flaunting the advertising standards and FAIS Act should be taken to task. • Technology - internet, mobile telephony will play a major role in the process but traditional channels will remain important. • The consumer, customer, client “is king “ and still wants face to face interaction • Listen to the voice of the customer • Customers want to be able to buy with confidence • Trust a major factor “Long live the intermediary” Aon South Africa (Pty) Ltd) | Aon Risk Solutions Proprietary & Confidential) | IISA Sun City Conference 10th – 12th June 2012

10. Q&A – Audience Participation Questions to audience: • Do you think that there is a role for both channels direct and intermediary channels? • 1. strongly disagree 2.disagree 3.not sure 4.agree 5. strongly agree • Is technology going to be the main driver of change in the insurance sector? • 1. strongly disagree 2.disagree 3.not sure 4.agree 5. strongly agree • Are ethical standards being adhered to by certain direct markets in advertising? • 1. strongly disagree 2.disagree 3.not sure 4.agree 5. strongly agree Aon South Africa (Pty) Ltd) | Aon Risk Solutions Proprietary & Confidential) | IISA Sun City Conference 10th – 12th June 2012

11. Q&A – Audience Participation Questions to audience: Drivers of customer choice – rank highest to lowest: • Online access i.e. internet when researching & purchasing • Personal interaction when buying • Call center communication • Simplicity and transparency of product offering • Brand of business Choice of interaction in insurance purchasing – rank highest to lowest: • Via an intermediary • On line purchasing - internet • Via direct market • Mail shot • Face to face Aon South Africa (Pty) Ltd) | Aon Risk Solutions Proprietary & Confidential) | IISA Sun City Conference 10th – 12th June 2012

12. “Long live the intermediary”