Access to Insurance - the DWP project and the role for businesses Ron Wheatcroft and Chloe Gilbert, Swiss Re, Protect Association, 16 November 2018

Agenda The DWP Working Party on Access to Insurance The work streams Workplace protection The SME challenge Your bright ideas please

Access to travel insurance for cancer sufferers - FCA CP in June 2017 and response in June 2018 Pricing – there is a lack of transparency around how premiums are calculated and the risk factors that drive quotes. This makes it difficult for consumers to understand whether the quote is a true reflection of their condition. Signposting – the lack of high quality information on options available to consumers after they receive a high quote or have been refused cover. This can, incorrectly, cause consumers to assume that they are uninsurable. Consumer understanding – the general lack of understanding reported by both consumers and firms around insurance terminology and the risk factors that are considered by providers when calculating the premium. The lack of consumer awareness about their options and difficulties in finding competitive insurance that is appropriate for their medical condition.

DWP Disability Champion Access to Insurance Working Group

Caxton House Declaration We have the following proposal for the declaration: We, the members of the Access to Insurance Working Group, are committed to improving access to insurance, specifically Protection insurance given the FCA work underway, for consumers with chronic health conditions and disabilities. Working together, we have four key aims: develop a signposting system for consumers, supporting consumer groups and charities so they can easily access guidance and advice about insurance from protection specialists improve the transparency of underwriting processes and practices around chronic health conditions and disabilities for consumers, supporting consumer groups and charities improve standards across all who distribute protection products so that we create a framework for improving access to expert underwriting advice across financial, health and charitable sectors develop a proposal for greater accessibility to insurance through the workplace 2

DWP Access to Insurance Work Streams Improving trust and underwriting transparency - lead Andrew Wibberley Signposting to specialists and distributor engagement – lead Graham Trudgill Professional development – lead Melissa Collett Charity and Consumer Body Reference Group and Work Stream – lead tbc Workplace Protection – lead Ron Wheatcroft

Workplace Protection – the challenges The DWP/DH Discussion Paper "Work, health and disability: improving lives“ Road Map report, Nov 2017 The need for simplicity? The Road Map challenges the industry to consider developing a product "that retains the positive aspects of GIP but which overcomes the existing challenges (complexity, perceptions of cost and benefit) and therefore is likely to be more widely taken up". Source: Road Map Analysis, Swiss Re, December 2017 As in-force insured data, together with cover provided by employers on a self-insured basis, show that most provision is made through workplace-based arrangements, there is logic in building on existing arrangements to expand the market. We are, though, unconvinced that the solution lies in product simplification. That approach is more of a "take it or leave it" and "one size fits all" product, yet it is commonplace now to offer a range of different benefit termination ages, replacement rates and benefit payment terms which meet the needs of the particular employer.

Workplace Protection – more challenges - indicative and non-exhaustive! Are simpler products an answer to improved take up? What are the other barriers? What is the role of the employer and workplace? Voluntary benefits – can they be made to work? Topping up existing cover? Scope of the work? Experience from other markets? Regulatory and legislative barriers?

Group long-term disability income, policies in force and membership, 2013-2017 Year 2013 2014 2015 2016 2017 Number of policies in force 17,193 17,119 17,111 17,183 17,442 Number of members 2,039,059 2,078,536 2,106,180 2,289,405 2,403,173

Group long-term disability income – split of policies by size of membership, 2016 – 2017 Number of members Number of policies, 2016 % policies in force, 2016 Number of policies, 2017 % policies in force, 2017 Fewer than 10 5,808 34% 5,922 10-49 6,225 36% 6,253 50-250 3,590 21% 3,691 Greater than 250 1,560 9% 1,584

Lack of SME coverage – a product or distribution problem Lack of SME coverage – a product or distribution problem? Or is it more to do with cost? “It's not a product issue. Potentially a cost and value challenge for some, however the vast majority of SMEs don't really have the knowledge to make that adjustment because the major challenge is distribution and how that can be supported in a commercially viable way!” Product provider “I think it's a priority issue. For many SMEs, our world is a 'nice to have' amongst many burning priorities. We need to find better ways to connect with the other issues being faced by SMEs so they see our products as relevant to addressing their other priorities.” Product provider

Business protection – the Legal & General view 84% of UK SME owners who took out a business protection policy did so because of advice from a finance professional  Research reveals that 25% of small businesses were referred to an adviser by their accountant, highlighting the importance of professional connections Legal & General, September 2018 Research commissioned by Legal & General previously found that most SMEs were acutely aware of the importance of individuals within their businesses, with more than half (53%) believing they would cease trading in less than a year if an owner ,director, partner or key person becomes terminally ill, critically ill or die. However, of those without business protection, nearly a third (32%) had not considered purchasing this type of insurance, again showing the importance of advice in raising awareness of the cover and nudging businesses to take out a protection policy.

Business protection – work in progress Swiss Re estimates that no more than 25,000 new business protection policies are purchased each year Legal & General has calculated a Business Protection Gap as £1.35trillion Competing priorities and in April 2019 auto-enrolment contributions go up. Should the market be considering vulnerable businesses and how to improve resilience?

Your bright ideas please!

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