Star Ratings and Product Differentiation Ben Heffer – Insight Analyst (life & protection)

Agenda Defaqto’s products and services Star Ratings Income protection Short term income protection Mortgage payment protection Creditor insurance product update

Defaqto products Compare defaqtomatrix

Star Ratings

What are Star Ratings? Star ratings measure comprehensiveness Star ratings do not measure suitability Features measured of benefit to end consumer Helps consumers segment the market Whole of market

Star rating methodology A range of individually scored features. An overall aggregated score. Benchmarks for 5, 4, 3 and 2 stars. A number of core criteria – features that must be included in order to achieve four or five stars.

Star ratings Since 2000, 80 different ratings (17 protection) Long term: Income Protection Insurance (IP) Short term: Short Term Income Protection (STIP) Mortgage Payment Protection Insurance (MPPI)

Star rating criteria (STIP & MPPI) Cover options (ASU, AS, U) Benefit periods (3, 6, 12 months, 24 months?) Excess periods (30 days, back-to-day-one) Definition of disability Initial exclusion (AS 30 days, U 30 days) Back to work help Treatment of pre-existing conditions Stress/Back problems Cancellation/change notice period

Income protection insurance (IP) Greater focus on: Financial underwriting Additional features and benefits, e.g. guaranteed insurability, indexation, waiver of premium Claims support services Health and wellbeing services

Add-ons

Add-ons for STIP and MPPI Constraints on cost No need to mitigate against long term sickness Cultural differences Sales channel factors Is there a value-add model for creditor insurance?

Creditor insurance product update

Creditor insurance products 2008 – 2016

MPPI v STIPP products 2008 – 2016

STIP provider types 2011 - 2016

Short term income protection 51 products (53) 17 underwriters (17) 25 providers (34) Banks/building societies Brokers/broker networks Web distributors Insurers

STIP – products by distribution channel

Number of PPI complaints to FOS

PPI – FOS uphold rates Source: FOS

Number of PPI complaints (cumulative) Source: FOS

Income protection outlook Increase in new income protection policies sold in 2015 (10.7%) Increase in limited payment terms (22%) Increase in 2yr benefit (92%) Long term vs short term? Source: SwissRe Term and Health Watch

Ben’s thoughts

Ben’s thoughts Product quality Customer loyalty Sales stats for STIP and MPPI

Thank you Ben Heffer, Insight Analyst – Life & Protection Web: www.defaqto.com Email: bheffer@defaqto.com Tel: 01844 295 447