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

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 10 th – 12 th June

Consumer triangle Big Fish Mid Market Commoditised Business Aon South Africa (Pty) Ltd) | Aon Risk Solutions Proprietary & Confidential) | IISA Sun City Conference 10 th – 12 th June Domain of the risk consultant/intermediary Domain of the risk consultant/intermediary/affinity administrator/direct personal lines (incl. tick box business)

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 10 th – 12 th June

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? 4 Aon South Africa (Pty) Ltd) | Aon Risk Solutions Proprietary & Confidential) | IISA Sun City Conference 10 th – 12 th June 2012

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 10 th – 12 th June

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: 6 The business practice must have, or is likely to have, a direct or indirect effect resulting in: 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.  Aon South Africa (Pty) Ltd) | Aon Risk Solutions Proprietary & Confidential) | IISA Sun City Conference 10 th – 12 th June 2012

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 10 th – 12 th June

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 10 th – 12 th June

Q&A – Audience Participation Questions to audience: 1.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 2.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 3.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 10 th – 12 th June

Q&A – Audience Participation Questions to audience: Drivers of customer choice – rank highest to lowest: 1.Online access i.e. internet when researching & purchasing 2.Personal interaction when buying 3.Call center communication 4.Simplicity and transparency of product offering 5.Brand of business Choice of interaction in insurance purchasing – rank highest to lowest: 1.Via an intermediary 2.On line purchasing - internet 3.Via direct market 4.Mail shot 5.Face to face Aon South Africa (Pty) Ltd) | Aon Risk Solutions Proprietary & Confidential) | IISA Sun City Conference 10 th – 12 th June

“Long live the intermediary”