Psychology of Selling Risk

Tom CincottaState Manager Vic TasCommInsure

What canwe build for the customer based on their expressed needs?

Basic Needs

Abraham Maslow - A Theory of Human Motivation (1943)

The needfor esteem

The need foraffection and

belonging

The needfor security

Biologicalneeds

Ego

Love

Safety

Physiological

The need forself-actualisation Fulfilment

Buyer Purchase Behaviour

Needrecognition

Information search

Evaluation of alternatives

Purchase decision

Post purchase behaviour

SEE HEAR DO

Howpeoplelearn

Buyer Purchase Behaviour

Visual Audio Kinaesthetic

How people make purchasing decisions

HEART HEAD GUT/SOUL

Emotional - feeling Analytical - facts & figures Somatic - trust

What do customers want?

Somatic decision making

“They listenedand truly understood me”

ENGAGE EXAMINE EXPLORE

“They clarifiedmy need”

“They provided guidance”

+

Love

Connection

Fun

Peace

Freedom

Security

Growth

Self-Expression

Adventure

To Contribute

Money

Fame

Sex

Recognition

Power

Responsibility

Achievement

Big House

New Car

Swimming Pool

Top 10 things people want What we spend time chasing!

What people REALLY want…

Goodhealth

Assist/helpfamily

Maintain standardof living

Life expectancy in Australia

MALES FEMALES

AGE 1901-1910 2006-2008 1901-1910 2006-2008

BIRTH 55.2 78.9 58.8 83.6

30 66.5 80.3 69.3 84.5

65 76.3 83.6 77.9 86.6

85 88.7 90.9 89.2 92

Life expectancy in Australia

COUNTRY MALES COUNTRY FEMALES

Iceland 80.2 Japan 86.1

Hong Kong 79.4 Hong Kong 85.1

Japan 79.0 Switzerland 84.2

Switzerland 79.0 Australia 83.6

Australia 78.9 France 84.1

UK 77.2 Iceland 83.3

France 77.1 UK 81.6

China 71.3 China 74.8

Vanuatu 68.3 Vanuatu 72.1

World Average 65.0 World Average 69.5

South Africa 48.8 South Africa 49.7

Swaziland 39.8 Swaziland 39.4

Will customers rediscover annuities?

Does any insurance company ever havea client ‘to age 99’for a term life policy?

Product Design… some thoughts

Clients think in termsof ‘debt’ and ‘income’!

Do insurance companies only want customers for a short period of time?

Does any insurance company want a customer ‘from the cradle to the grave?’

Will customers rediscover insurance bonds?

What do different customer segments prefer?

Listener

People person

Trustworthy

Sincerity

Supportive

Understanding

Licensed planner

Proven track record

Acumen

Certified

Large company

Experience

Battle of the sexes

WOMEN WANT: MEN WANT:

In 2009, there were

120,118registered marriages

Average age

Groom: 31.5yrs

Bride: 29.2yrs

Marriage

Source: ABS - Marriages & Divorces, Australia (3310.0)

Divorce

Source: Australian Demographic Statistics (3101.0); Divorces, Australia (3307.0.55.001); Marriages & Divorces, Australia (3310.0)

Today 1 in 5marriages end in divorce

within 10yrs

More than 1 in 3marriages end

within 20yrs

Today’s divorce rateis estimated as

high as 48%

Median age for divorce

Men: 44.4yrs

Bride: 39.2yrs

FOR WOMEN

Impact of Divorce

1970

40% of marriages ended in divorce

2010

48% of marriages ended in divorce

20% divorce within 10yrs

33% divorce within 20yrs

2015

50% of marriages will end in divorce

Normally childless household

Living standards decline after divorce

Income decreases,but increases after ‘composition’

Normally sole parents

Disposable incomefalls more sharply

Less likely to accumulate wealthafter divorce

FOR MEN

?Will you be leaving your family as 2nd heir?

Mortgage

In 2009 there were 295,700 births registered in Australia

Median age of all birth mothers in 2009 was 30.6yrs, 3.3yrs older than mothers in 1985 (27.3yrs)

Median age of all fathers in 2009 was 33.0yrs, 2.9yrs older than fathers in 1985 (30.1yrs)

Women aged 30-34yrs continued to have highest fertility rate of all women

Birth / Adoption of Child

Source: ABS (3301.0) - Births, Australia, 2009

Cost of Children…

$$

$$

$

$ $$

$500,000+

Dependent Children at Home

Age 50-54 52.1%

Age 55-59 32.1%

Age 60-64 20.3%

Age 65-69 12.8%

Footloose & Family Free

CHARACTERISTICS

18 -29 years old

No dependants

Saving for next best thing

Expensive social lifestyle

Invincible – “It won’thappen to me!”

Approximately 27%of population

Young, singleand starting out

Leading lifestyles

CHARACTERISTICS

30+ years old – Single or DoubleIncome No Kids (DINK)

Wealth accumulators

Large disposable income

Control & security

Health and appearance is important

Approximately 15% of population

Mature singlesand DINKs

Family room

CHARACTERISTICS

25 - 45 years old

Raising young family –Time poor – Need experts!

70% need savings to survive

40% run out of money in 1 month

Focus from individual to family

Approximately 18% of the population

YoungFamilies

CHARACTERISTICS

35 - 55 years old

Focus on health

Income provides lifestyleof entire family

Parents spend more timeaway from children

Reduced debt levels

Focus on retirement

Approximately 13% of population

Family Fun

Established familieswith older children

CHARACTERISTICS

Caring for aging parent

Challenges of ‘boomerang children’

Adult children at university or working

25% of children under 35live with parents

“KIPPERS” – Kids In Parents’ Pockets Eroding Retirement savings

Family Fun

Established families

with older children

Sandwichgeneration

CHARACTERISTICS

55+ years old

Focus on retirement savings

Protect current assets

Reduced debt levels – most havepaid off mortgage

Focus on health

Indulge themselves & family

Approximately 13% of population

Empty Nesters

Dependantsleft home

Man at work vs. Capital at work

Savings vs. Insurance

- Income

- Debt

- Retirement

Retirees prior to age 65

- 41% due to illness or injury

Retirees

Dependants

left homeBiggest Fear for 99% of all Baby Boomers:

Not enough MONEY in Retirement!

Is there a “one size fits all” distribution method?

Product Design… some thoughts

How will insurance companies educate customers so that they may make informed decisions?

Is there a “one size fits all” policy?

Understand the trade-off regardingConvenience vs. Price

Engage clients via their preferred method

Current product design encourages lapses

Insurance companies need informed customers

Can we reallyprice for anything?

Product Design

There is nouninsurablerisk…

if the customer is willing to pay the premium!

Product Design

BENEFITS &FEATURES

CLAIMS &LAPSES

EXCLUSIONS UNDERWRITING

PRICING

• Funeral Benefit - $15,000• TPD must be “bundled”

with life• Total travel advisory

exclusion at time of claim • Cannot nominate a

business as policy owner• No level premium option

• Funeral Benefit - $30,000• TPD may be stand alone

or bundled• May nominate a business,

individual or trust• Level or stepped premiums

$1.5 million – 16 to 45$1 million – 46 to 55$500,000 – 56 to 65

No limit

DIRECT INSURANCE

Life Cover

RETAIL INSURANCE

TYPICALLIMITATIONS

• 3 month claim qualification• Total exclusion for “motor

sports”• Must be “bundled” with life• Normally only “any” occupation• Cannot nominate a business

as policy owner• No level premium option

• Loss of limbs and sight• Partial payments• Early payment for serious TPD

(3 month qualification waived)• May be stand alone or bundled• “Any” or “Own” occupation• May nominate a business,

individual or trust• Level or stepped premiums

$1.5 million – 16 to 45$1 million – 46 to 55$500,000 – 55 to 59Nil – 60+

Maximum benefit of $5 million

DIRECT INSURANCE

TPD Cover

RETAIL INSURANCE

TYPICALLIMITATIONS

• Only 4 conditions - Heart Attack, Cancer, Stroke and Coronary Artery Bypass

• Serious Injury Option that includes: Paralysis, Blindness, Deafness, Loss of 2 Limbs (due to accidental injury)

• Pre-existing condition clause• Cannot nominate a business

as policy owner• No level premium option

• 40+ conditions• Level or Stepped premiums

Lesser of $500,000,or 50% of Life Cover benefit.

Maximum benefit of $2 million

DIRECT INSURANCE

Trauma Cover

RETAIL INSURANCE

TYPICALLIMITATIONS

• Covers “accidental injury” only.• Waiting period - 30 or 90 days • Indemnity • Payable for either 6, 12 or 24

months• Must be totally disabled for

entire waiting period• No partial disability payments• Second claim not paid for

same or related cause

• Payable up to age 65• Agreed or Indemnity• Level or Stepped premiums• Super continuance• Medical professionals benefit• Rehabilitation Benefit• Waiver of premium

(unemployed, maternity)• Waiver of waiting period for

specific conditions

$3,000 to $10,000 per month Maximum benefit = $30,000/month

DIRECT INSURANCE

Income Protection Cover

RETAIL INSURANCE

TYPICALLIMITATIONS

Child Cover

• Accidental Death, Paralysis, Blindness, Deafness, Loss of use of 2 limbs, Encephalitis, Meningitis, Major Head Trauma

• Excludes any congenital condition

• 3 month qualification periodon all benefits

• No level premium option

• 38 Conditions• 3 month qualification period

only on Heart Attack, Cancer, Stroke, & Coronary Artery procedures

• Level premium only

$20,000 to $50,000 Maximum benefit of $250,000

DIRECT INSURANCE RETAIL INSURANCE

TYPICALLIMITATIONS

Premium Comparison Male Non-Smoker

AGE 30 35 40 45 50

GE Money - Life Protect 93% 109% 138% 145% 134%

HCF - Smart Term 177% 194% 188% 174% 136%

OnePath - EasyProtect Life 93% 95% 100% 106% 103%

ClearView - Life Insurance 185% 195% 195% 189% 174%

Medibank - Life Insurance 132% 135% 139% 130% 127%

Citibank - Pure Life 165% 178% 194% 181% 172%

Suncorp - Life Protect 140% 151% 166% 155% 149%

MLC - Essential Life 155% 152% 150% 150% 137%

Virgin Life - Tailored Life Insuracne 214% 211% 199% 180% 161%

Priceline - Priceline Protects 228% 255% 257% 256% 225%

AIA Australia - Life Cover - & Crisis Recovery & TPD 101% 96% 93% 97% 96%

AMP Life - Flexible Life Time Prot - Crisis Cover Standard & TPD 100% 103% 103% 104% 106%

Asteron Life - Life Cover 104% 104% 99% 102% 117%

AXA - Life Insurance Plan - Trauma 105% 104% 102% 102% 105%

BT - Term Life - Living Insurance TPD 97% 102% 98% 104% 103%

CommInsure - Total Care Plan 100% 100% 100% 100% 100%

MLC Insurance - Life Cover Insurance - Plus TPD extension of CI 104% 104% 106% 108% 108%

Macquarie Life - FutureWise Life 99% 99% 103% 104% 108%

OnePath - OneCare - Comprehensive 97% 99% 102% 106% 111%

TAL - Life Insurance - Critical Illness Standard TPD 93% 94% 94% 97% 107%

Zurich Australia - Protection Plus - & Basic Trauma 96% 96% 96% 96% 97%

DEATH

TPD

TRAUMA

$500,000

$50,000

$500,000

Premium Comparison Female Non-Smoker

AGE 30 35 40 45 50

GE Money - Life Protect 75% 79% 121% 138% 139%

HCF - Smart Term 130% 155% 187% 178% 136%

OnePath - EasyProtect Life 91% 90% 95% 103% 109%

ClearView - Life Insurance 162% 196% 189% 204% 178%

Medibank - Life Insurance 135% 149% 138% 130% 121%

Citibank - Pure Life 199% 227% 223% 214% 195%

Suncorp - Life Protect 168% 193% 190% 184% 168%

MLC - Essential Life 108% 102% 152% 172% 144%

Virgin Life - Tailored Life Insuracne 245% 232% 204% 202% 171%

Priceline - Priceline Protects 146% 200% 239% 230% 199%

AIA Australia - Life Cover - & Crisis Recovery & TPD 89% 96% 95% 94% 93%

AMP Life - Flexible Life Time Prot - Crisis Cover Standard & TPD 104% 110% 107% 112% 106%

Asteron Life - Life Cover 103% 99% 96% 99% 109%

AXA - Life Insurance Plan - Trauma 104% 104% 103% 102% 100%

BT - Term Life - Living Insurance TPD 91% 95% 100% 103% 99%

CommInsure - Total Care Plan 100% 100% 100% 100% 100%

MLC Insurance - Life Cover Insurance - Plus TPD extension of CI 108% 111% 108% 110% 106%

Macquarie Life - FutureWise Life 103% 104% 103% 104% 101%

OnePath - OneCare - Comprehensive 97% 96% 100% 105% 108%

TAL - Life Insurance - Critical Illness Standard TPD 92% 94% 93% 97% 104%

Zurich Australia - Protection Plus - & Basic Trauma 97% 98% 98% 94% 94%

DEATH

TPD

TRAUMA

$500,000

$50,000

$500,000

Product design

GROUPINSURANCE

More features

Lower premiums

Will see standardisation

FBT & ETP Death & TPD cover – minimum sums insured

TPD – move to “true”any occupation

Income Protection – indemnity only

Trauma – Prohibitedfrom 1 July 2014

Fewer standalone policies

Legislation dictatespolicy design in Super

Super fundsdemanding

Summary

Multiple methods of distribution & engagement

Blurring of products between Direct, Retail & Group

Need“wholeof life” conceptof client

Educationis vital!

Summary

Psychology of Selling Risk

Tom CincottaState Manager Vic TasCommInsure