Insurance Ireland Consumer 360 Conference

Conduct Developments – Lessons from Europe

Hugh Hessing – Aviva Ireland CEO7th December 2015

There’s been a tsunami of regulatory change across Europe….

2007

2009 2011

2010

Consumer Credit

Directive

2012

2013

2014

2015

2016

GDPR

…but what has been the real impact? Have consumers benefited, do they understand?

Has all this reform achieved its intended outcome?

3

Achievements: Consistent implementation across markets General acceptance by consumers No significant drop in customer numbers Good collaboration on implementation between all stakeholders

Unforeseen consequences:x Short term consequences – far larger and more sustained spike in annuity sales prior to implementation than predicted x Unexpected opportunities for companies to gain a competitive advantage

Objectives• Equal treatment for men and women in access and supply of goods and services • Insurance in scope Dec 2012 (8yrs post enactment) following ECJ judgement• Remove gender as a rating factor

Gender Directive

Has all this reform achieved its intended outcome?

4

Achievements: Better advice – not influenced by commission

Advisers better qualified

Allows comparison of the cost of using Advisors

Unforeseen consequences:x Increase in execution only investment

x Reduction in IFA numbers leading to Advice Gap - those most needing advice not receiving it

x No significant reduction in fees

x Plethora of confusing fee structures

Objectives• Clarity for consumers • Address broker remuneration distorting consumer outcomes• Increase professional standards

Retail Distribution Review (UK)

Has all this reform achieved its intended outcome?

5

Achievements:

Increased focus on compliance

Significant fines & prosecutions

Greater awareness

Unforeseen consequences:x Onerous, confusing and time consuming obligations x Loyal, long-standing customers made to feel like criminalsx High cost of administration increases cost for the consumerx Inconsistency of application across Europe

Objectives• Combat money laundering• Effective counter terrorist financing laws• Support public interest in reducing access by terrorists/criminals to financial

instruments

Anti Money Laundering

Despite all the new regulation, consumers still don’t feel they understand Insurance Products

6

“I don’t really understand about pensions, savings policies and things like that*

Ireland UK EU60%5%

10%15%20%25%30%35%

Pre-recession (2005-2008)In recession (2009-2011)Post recession (2012-2015)

% w

ho a

gree

with

stat

emen

t

*IPSOS Aviva Consumer Attitudes Survey Qtr2 2015

And consumer trust in Insurance Companies is lower than it was during the recession*

Ireland UK EU60

5

10

15

20

25

Pre-recession (2005-2008)In recession (2009 - 2011)Post recession (2012 - 2015)

% w

ho tr

ust i

nsur

ance

com

pani

es

*IPSOS Aviva Consumer Attitudes Survey Qtr2 2015

So what are the underlying system conditions driving the wrong outcomes?

Competing concurrent regulation

Designing around the “1%”

Regulatory design is not agile

The industry of evidence

and

CUSTOMER NOT AT THE HEART??

What is our vision in Insurance? Improve returns for policyholders and deliver value for shareholders

To become the preferred company for all our stakeholders

To help our customers achieve financial prosperity & peace of mind

Help our customers understand and protect themselves from risk

We free people from fear of uncertainty

10

To create a better everyday life for the many people

To put joy in kids’ hearts and a smile on parents’ faces

To be earth’s most customer centric company

What does “customer at the heart” look like?

What is needed to drive the change we need?Industry Culture

Outcomes & Experience

vs Arms Length Review

Innovation Around

Evidencing

Oversight Reinforcing Continuous

Improvement

Continued & Improved Collaboration is Key