LPAN Digging in to the detail Income Replacement products Marc Fabris Strategic Marketing Manager – Life Risk

© Zurich 2 Disclaimer The information contained in the following presentations is general information and is only intended for the use of professional advisers. It does not take into account the objectives, financial situation or needs of any person. These factors should be considered before acting on this information. Zurich Australia Limited ABN AFSL of 5 Blue St., North Sydney, is the issuer of Zurich Wealth Protection products. A Product Disclosure Statement (PDS) for Zurich Wealth Protection products is available and can be obtained by calling The PDS should be considered before making any decision in relation to the product. Zurich Australia Limited and its related companies receive remuneration such as fees, charges or premiums for the products which they issue. Details of these payments including how they are calculated and when and how they are payable can be found in the relevant PDS or other disclosure document for Zurich financial products. Also refer to the important disclosures on the final slide. SWAS

© Zurich 3 Agenda Income Replacement -Agreed Value Vs Indemnity -Capability Clauses -Partial Vs Total disability Zurich’s 2007 product update & Service Awards

© Zurich 4 Indemnity Vs Agreed value Around 1/3 of all policies are indemnity.. So beware Income forecasts/projections -Disclosure requirements remain Reduced benefits -Aviva – 2 years partial, mental illness restrictions, 2 yrs ‘own’ then ‘any’ -MLC Std – 6 months partial, mental illness restrictions, 2 yrs ‘own’ then ‘any’ Employment breaks -Study -Childbirth Source: Plan for Life detailed statistics 2006

© Zurich 5 Agreed Value Vs Indemnity Agreed Value Underwritten benefit is payable assuming can be justified. Indexation increases usually covered. Financials may later be required Endorsed or Guaranteed Agreed Value Underwritten benefit and indexation increases payable without further financials for TOTAL DISABLEMENT. Partial disablement still requires financials. Indemnity Payable is lesser of schedule amount and recent income (usually last 12 months). Non-disclosure is still an issue

© Zurich 6 Zurich’s Approach Agreed value as standard Indemnity available with a discount -No other product limitations apply Financial endorsement is available for Agreed Value -Then no financials needed for total disablement claims -Details in Zurich Risk Illustrator’s ‘Documents and Forms’

© Zurich 7 Capability Clauses Ratings were introduced in late 2005 by ProPlanner Researcher concern over excessive life company capacity to offset ‘notional’ income Issues to consider: Policy intent should be clear for the insured – unknowns should be avoided However.. The lack of any control can leave the insurer at risk from illegitimate claims Some examples follow …

© Zurich 8 Capability Clauses If you are partially disabled and not working to your capability, 'B' will be calculated based on what you could reasonably be expected to earn if you were working to the extent of your capability Asteron (C) Source: ProPlanner Risk Researcher April 2007

© Zurich 9 Capability Clauses When the Life Insured is Partially Disabled but not working, 'B' will be calculated on the monthly income it would be reasonable for the Life Insured to earn if working as determined by Us. If work is unavailable or cannot be found then, following receipt of medical advice from the Life Insured's Medical Practitioner and any Medical Practitioners nominated by Us, We will determine what type of work the Life Insured could perform and the amount of income it would produce AIG (C) Source: ProPlanner Risk Researcher April 2007

© Zurich 10 Capability Clauses If the life insured is not working to their assessed capacity then 'B' will be the amount they could expect to earn if they were ING (B) -When assessing capacity, consideration will be given to medical evidence, and other factors related to the life insured's condition. Source: ProPlanner Risk Researcher April 2007

© Zurich 11 Capability Clauses We will only pay benefits where the loss of income is a result of Sickness or Injury. Zurich (B) -We will take into account available medical evidence (including the opinion of your registered doctor) and any other relevant considerations directly related to your medical condition (including information provided by you) Source: ProPlanner Risk Researcher April 2007

© Zurich 12 Capability Clauses No policy controls Potential claims blow- out (bad for insurer) Broad / undefined provisions Potentially unfair ‘notional’ offsets (bad for insured)

© Zurich 13 Capability Clauses ProPlanner ratingABC AIG Asteron Aviva AXA CommInsure ING MLC Tower Zurich Source: ProPlanner Risk Researcher April 2007

© Zurich 14 Loss of Income in practice Waiting period 20% impact Benefit paid any impact 10% allowed before offset Indexed quarterly Direct credited ½ monthly payments “unable to generate at least 80% of your Pre-Disability Income”

© Zurich 15 Does Day 1 Partial matter? Source: Zurich claims to April % 18.6%2.5% Total Partial/Total Partial 93% Total before Partial 7% Partial before Total Finalised Zurich claims

© Zurich 16 Does Day 1 Partial matter? Total only 78.9% Partial only 2.5% Total/Partial 17.3% Partial/Total 1.3% Day 1 partial doesn’t matter Day 1 partial or no payment Day 1 partial not needed unless total is only a few days [< 7 OR 14] Day 1 partial needed for initial payments, otherwise delays Source: Zurich claims to April 2007

© Zurich 17 Is Total Disablement required before partial? Day 1 Partial Professionals Day 1 Partial Blue collar AIG Asteron Aviva AXA CommInsure ING MLC Tower Zurich Source: ProPlanner Risk Researcher April 2007

© Zurich Zurich Product Enhancements Commission options 4 Competitive alternatives (Year 1 -> 33% up to 121%) Split trail commission available Dial down options with permanent policy discounts Shown on Risk Illustrator reports

© Zurich 19 Commission options Prior to April (incl. GST) After April (incl. GST) Upfront (%) / / Hybrid 1 (%) Wasn’t available88 / 19.8 Hybrid 2 (%) 60.5 / 27.5No change Level (%) 33No change

© Zurich 20 Zurich’s focus on service..

© Zurich 21 WA Taylor Intermediaries Study number Life Insurance Company 1 ‘06 number Life Insurance Company number Life Insurance Company 1 ‘05 1 ‘04

© Zurich 22 AFA/Plan for Life – Product and Service Awards Inaugural awards presentation for 2006 Zurich – Finalist – Trauma product Zurich – Winner – Service Quality Award

© Zurich 23 Service awards – reinforced by new business quality 2006 results -2.3 Average days Initial requirements sent -28% Cases completed within 5 working days -92% If 3pm UW acceptance - Completed same day + Policy docs sent within 48 hours -19 Median days from creation to conversion

© Zurich 24 Summary Zurich’ Loss of Income definition stands out in the crowd -Clarity -Intent Agreed Value Vs Indemnity -Beware Indemnity limitations -Correct income disclosure Zurich continues to position well -Service -Product -Pricing -Remuneration

© Zurich 25 Thankyou

© Zurich 26 Disclaimer The general information in this publication is dated June 15 and is given in good faith and is derived from sources believed to be accurate as at this date, and may be subject to change. Neither Zurich Australia Limited ABN AFSL nor any of its related entities or any of their employees or directors (Zurich) give any warranty of reliability or accuracy nor accept any responsibility arising in any way by including by reason of negligence for errors or omissions. Zurich 5 Blue Street North Sydney NSW Phone Note: The references to Number One overall for Life Risk is in relation to the results of the WA Taylor 2006 Intermediaries Study - a Study into the Life Insurance and Wealth Management Industry in Australia. Policy definitions have been extracted from ProPlanner – April 2007.