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Distribution & Consumer Values International Insurance Society Seminar

Distribution & Consumer Values International Insurance Society Seminar. Hong Kong July 13th 2005. Consumers unhappy. Distributors unhappy. Regulators unhappy. Conundrum. High pressure sales Distrust of distributors & providers Poor value for money. Commissions under pressure

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Distribution & Consumer Values International Insurance Society Seminar

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  1. Distribution & Consumer ValuesInternational Insurance Society Seminar Hong Kong July 13th 2005

  2. Consumers unhappy Distributors unhappy Regulators unhappy Conundrum High pressure sales Distrust of distributors & providers Poor value for money Commissions under pressure Mis-selling accusations Can’t afford to serve many segments Scandals Retirement savings gap High charges

  3. Consumers in charge Aligned Distributors & consumers Distributors focus on value add A solution in sight?

  4. Consumers in charge: Essential ingredients Level of intermediation Low High Low High Med.

  5. Aligning economic interests Upfront Level Wrap Fee Distributor Consumer Regulator Bring it on Is it worth it? Look for high rollers Clients too cheap That’s a lot Seems fair It’s simple Why pay so much? Mis-sale alert Better Even better Now you’re talking TRANSPARENCY

  6. Impact of charging: Example Payback Period 20 19 1% AMC with min £50pa 1% AMC with min £50pa 18 17 0.5% AMC + 5% up front 1% AMC + 5% up front for 3 years 16 Better for providers 1.5% AMC for 10 years then 1% 1.5% AMC 1.5% AMC 15 14 13 2% AMC 2% AMC 1% AMC + 5% up front 1% AMC + 5% up front 12 6% 8% 10% 12% 14% 16% 18% 20% IRR Better for providers

  7. Aligning distributors to consumer needs Segment Characteristic Likely Adviser • High • Complex • Multi coverage • Tax • Advice • Wealth & • Income • Low • Simple • 1-2 coverages • Access & • education Sophisticated Sceptics • Distributor • Independent Adviser • Value support • Financially sophisticated • Strong preference for face-to- face DIY • Uninterested in support • In control of finances • Direct • Strong interest in finances • Not in control of them • Independent Adviser Advice Seekers • Direct • Distributor • Not very interested in finance • Do not trust providers Provider Sceptic • Uncomfortable with finances • Value a brand • Distributor • Independent Adviser Financially Averse

  8. Distributors’ focus on value added: Enablers • Product simplicity • Regulatory encouragement of “pull” products • simple savings plans • transparency across all financial products • tax ( &/or employer) incentives for consumers • education • Business simplicity to allow more consumer self service, product selection, access advice on demand • Technology enablement • auto-underwriting • straight through processing • auto claims adjudication • streamlined distribution

  9. Real Life Examples Old approaches must change, especially if potential conflicts The emerging brokerage model It’s difficult to change, the theory doesn’t always work UK Stakeholder pensions Success can be achieved if based on market realities The Aflac story in Japan

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