michael paff director, wealth protection products
TRANSCRIPT
Agenda
Michael Paff IntroductionPhil Ruthven Life Insurance into the 2nd DecadeBernadene Gordon Service EnhancementsChris Kirby Product EnhancementsDan Powell Summary
Topics
1. The Economic Scene2. The Political Scene3. The Social Scene4. Life Insurance, Planners & Success
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101112
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
Per
cen
t
Past 25 years 3.5%
p.a
1950-1969 growthin US$ market terms
Purchasing Power Parity (PPP) terms
IMF/Economist//IBISWorld: 09/05/10
2008 3.2% 2009 -2.5% 2010 2.5% (F)2011 2.7% (F)
World GPD GrowthReal growth (PPP), 1950-2011(F)
7
19
2830
35
43
47
49
49
4954
60
60
62
64
6972
75
77
80
91
99
101108
115
118192
0 20 40 60 80 100 120 140 160 180 200 220
RussiaAustraliaS KoreaIndonesi
TaiwanMexico
BrazilTurkey
ArgentinaThailand
WorldSpainIndia
NetherlanIreland
UKCanadaPortugal
GermanyFrance
USABelgiumIcelandGreece
ItalySingapor
Japan
The PIGS Group
The Economist/IBISWorld: 10/05/10
Serious serious trouble
Virtuous, thanks to the Howard/Costello government
31% of world economy is in countries with Public Debt of >90% of GDP
Serious troubleSerious trouble
Serious trouble
Serious troubleSerious trouble
Public Debt: 2010 (F)% of GDP
Serious trouble
Source: Westpac-Melbourne Institute (IAESR), IBIS estimates 14/034/0
Australian Index of Consumer Sentiment2 months progressive to April 2010
65
70
75
80
85
90
95
100
105
110
115
120
125
130
135
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
Recession Level
Year commencing June
-3
-2
-1
0
1
2
3
4
5
6
7
8
9
19
60
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
36 qtrs. 34 qtrs 34 qtrs 33 qtrs 38 qtrs 33 qtrs?
36 qtrs ?
Source: IBISWorld: 04/03/10
Average long business cycle is 34 quarters (81/2 years)
Years, ended June
Forecast
Economic GrowthAnnual real GDP growth (%) progressed in quarters to December 2009 (and forecast to June 2013)
ABS 5206-26 /IBISWorld
Agriculture
2.6%Utilities
2.4%
4.9% Transport
GDP $1260 billion (current prices) $1208 billion (constant F2008)
Finance & Ins.
4.5% W’Saling
Mining
6.8%
Govt. Adm. 5.0%
O’Ship Dwells. 7.2%4.5% Retailing
6.9%
Construction
2.8%
9.9%
Communications
11.3% Prop. & Business
Services
Education 4.1%
Health 5.9%
Cult & Rec. Serv.
1.8%
Pers. & Other Serv.Hospitality
(2.2%)
8.4% Manufacturing
Sectors Primary
Secondary Tertiary
Quaternary
Quinary
0.9%
Ind. Taxes 8.1%
Australia’s Industry MixValue added basis Shares of GDP in constant F2007 price terms C2009
2.5
2.5
2.8
3.0
3.0
3.4
4.0
4.1
4.2
4.8
5.8
5.9
3.5
3.4
3.3
3.2
3.2
3.1
3.6
2.2
-1 0 1 2 3 4 5 6 7 8
ManufacturingEducation
Other ServicesProp/Rental Serv
HospitalityRetail Trade
UtilitiesConstruction
W'Sale TradeAdmin Serv
Dwelling O'ShipGDP
TransportGovt Adm/Def
Retail TradeCult & Recn ServCommunications
HealthProf/Tech Serv
Finance & InsAgriculture
Mining
Percent
Source: IBISWorld 13/04/10
-1.02.0
Australia’s Industries GrowthCAGR (trend), next 5 years to C2014 (constant prices)
• Big deficit in F2010 , a year without a recession!
• Gave households $17 billion as a stimulus in F2009 (they already had $60 billion more discretionary income anyway!)
• Tried to enact ETS legislation before Copenhagen and instead of a direct Carbon tax system !
• Conducted “comprehensive” Taxation Study, leaving out GST !
• Wasted billions on insulation and education infrastructure
• No meaningful action from expensive 2020 Conference
Federal Government Scorecard
• GST excluded from review (ours 10%, OECD 17.5% average), so not a serious review and not the “most comprehensive ever”
• Very few recommendations to be pushed by Rudd government
• Super levy up to 12%, but again to be paid by employers (better to have 15%, with 5 of that by employee)
• Super tax on super mining profits (but how defined and for how long?)
• ETS deferred (forever?)
• Vast majority of over 100 reforms shelved
The Henry Tax Review Report
02468
10121416182022242628303234363840
1850
1860
1870
1880
1890
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
2010
2020
2030
2040
2050
Forecasts
(IBISWorld)
Million 37.8
29.3
25.6
22.3
33.4
Year, ended June
Australian Population1850-2051
Source: ABS/IBISWorld 29/01/10
0
10
20
30
40
50
60
70
80
90
100
110
120
130
140
1501
98
0
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
Actual prices
Year, ended June
Inco
me
($‘0
00)
Constant 2009 prices (CPI)
Average 2010(F)
$127,370 per household
Real growth
1999-2009 1.9% pa
Household incomeAverage/household 1986-2010 (F)
$ 1052 billion ($123, 540 per household)
H’Hold durables 3.4%
Motor vehicles 2.0%Other 1.0%
Capital Related
17.7% Non-durables
6.4% Durables
Taxes(& social contributions)
4.6%
13.5%
Depreciation 6.7% Propty Interest 4.6% Consumer Debt Int 1.2%Unincorp. Interest 0.8%Transfers 0.4%
Entertainment & Gaming
Hospitality
Rent1 12.5%
13.7%
Food 7.3% Alc.& Tobacco2.4%Clothing 2.1%Utilities 1.5%Veh. Operation 3.4%Other 1.0%
Education
3.7%
Other Services
Communicns.1.7%Fares1.9%
2.3%
Fin. & Ins. Serv. 8.6%
7.8%
3.7% Health
Note: 1 includes imputed rent (home ownership) Source: ABS5206/IBISWorld
2.3%Mobility
Savings
3.1%
(& other dwelling costs)
Australian Household ExpenditureYear to December 2009
Source: IBISWorld/Reserve Bank
0
2
4
6
8
10
12
14
16
18
20
22
241
96
0
19
63
19
66
19
69
19
72
19
75
19
78
19
81
19
84
19
87
19
90
19
93
19
96
19
99
20
02
20
05
20
08
20
11
20
14
20
17
20
20
Year, ended June
Inte
rest
Rat
e (%
)
Credit Cards
Overdraft(small business, variable)
Mortgage(standard bank)
Indicator Lending RatesAustralia F1975 – 2013(F)
Source: ABS 5206-36 11/03/10Year, ended June
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
19
60
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
Household Savings% of Gross Household Income (4-qtr. Moving average), 1960 – December 2009
$ 7300 billion ($ 846,550 per household)
Housing(owner-occupied)
Invest.Housing
Super. & Life
Commercial & Rural
Other 2
.4% Deposits 9.1%
(& currency)
Shares 5.3%
Sources: Reserve Bank Statistical Tables B20; ABS 5204-51, IBISWorld estimates 22/04/10
HouseholdDebt
$ 1430 billion($165,830
per household)
Assets $ 7300 billion, Net Assets $ 5870 billion .
Per H’Hold $ 680,070
Debt servicing comes from wages (mainly), rental property
returns, and interest & dividends from liquids & securities
42.2%
13.7%
19.9%
Equipment, Inventories
H’hold durables, collectables) O
ther
Pro
p. 4
.1%
Including Securities & Loans
Dura
bles 3
.4%
Includingunfunded
Australian Household Assets & DebtJune 2010 (F)
8.42 million $1053 billion $5351 billion
Source: ABS/IBISWorld 10/03/10
Household Income Wealth
1.68 million H’Holds $125,120 $635,800 Average
20.0%
20.0%
20.0%
20.0%
20.0%
45.1%
24.5%
16.3%
9.6%4.5% 1.0%
61.2%
20.0%
12.1%5.7%
Among 8.4 million households:
>1,000,000 millionaires 46000 > $ 5 million 7,200 > $10 million
Richest
Well Off
Middle
Struggle
Poorest
Household Income and Wealth DistributionShare of total by Quintile, F2009
Revenue ($billion) 54.5 4.8
Growth to F’15 (% pa ave.) 1.4 7.8
Contribn. To GDP (% ) 0.29 0.22
Enterprises 28 3040
Employment (‘000) 27.0 16.0
Wages ($ billion) 1.6 1.6
Largest Players AMP 26.5% 9.6% NAB 23.0% 7.0% ING 17.7% AXA 8.6% Westpac 6.2% 8.0%
Life Insurance Financial Advisers
Perspective F2010 (F)
• Ability to effectively communicate and negotiate
• Having a loyal customer base
• Having a good reputation
• Market research and understanding
• Qualified work force in a unique organisational culture
Key Success Factors for Planners
9.911.112.5
13.815.6
17.719.7
21.824.7
28.635.2
48.9
3.2
158.0
12.6
4.25.66.77.9
-2.50.21.02.1
9.0
-50 -40 -30 -20 -10 0 10 20 30 40 50 60
Worst 5024th 5023rd 5022nd 5021st 5020th 5019th 5018th 5017th 5016th 5015th 5014th 5013th 5012th 5011th 50
Average10th 50
9th 508th 507th 506th 505th 504th 503rd 502nd 50
Best 50
PercentSource: IBISWorld 19/11/09
23% > Best Practice (ROSF 22.2%)
42% > Average (ROSF 12.6%)
43% > Cost of capital (12.0%)
68% > Bond Rate (5.4%)
11% Losses
-128.0-10.5
Australian Profitability by CohortsReturn on Shareholder Funds (after tax), Top 1250 businesses 5 years to F2009
1. They stick to one business at a time and do not diversify 2. They aim to dominate some segment (s) of their market 3. They are forever innovative, valuing the business’ IP. 4. They outsource non-core activities to enable growth. 5. They don’t own “hard” assets. 6. They have good and professional financial management. 7. They plan from the outside-in not the inside-out 8. They anticipate any new industry lifecycle changes. 9. They follow world best practice for their own type of business.
10. They develop strategic alliances.11. They develop unique organisational cultures.12. They value leadership first and management second.
What the Best Enterprises Are Doing
What’s important to you?
awareness of
the offer
sales support
access
relationships
lodgement
underwriting
claims product
process
Electronic lodgement process
Challenge
• Choice – the ability to offer different options
• Cost to your business – paperwork + administration
• Compliance – the need to protect your business
process
lodgement
Electronic Lodgement process
Solution
• Options
• Reduced admin
• Electronic Lodgement Authority Form
John
Underwriting
Challenge
• Access to the decision-maker
• Potential long e-2-e time frames
• Cost to business
underwriting
AMP Underwriting Concierge Service
Solution
• Electronic Pre-Assessment Service
• Dedicated Underwriter from start to finish
• AMP arranges medical tests directly with client
Claims
Challenge
• Direct access to decision-maker
• Quick turnaround of claim assessment
• Tailored communication
• Dedicated service
claims
AMP Claims Concierge Service
Solution
• Direct access to decision-maker
• 24 hour turnaround on claims review and assessment.
• Dedicated claims assessor.
merged PDS and plan rules “one source of truth”
AMP Risk Bulletin
changes to our underwriting philosophy
new AMP risk look and feel
access to the right information
sales support to help grow my business
more cover for more people
collateral that resonates with the need for insurance
What else is coming?
TODAY TOMORROW
Income Protection – the challenge
Advisers
Want the choice to recommend a definition of Total Disablement appropriate to their client’s occupation.
Clients
Want a product that is flexible enough to meet their future needs.
Income Protection – the solution
Definition of Total Disablement now includes both the “10 hour” definition and “duty” based definition.
Choice at claim
10 hour based
Unable to carry out any of the duties which are critical to the proper performance of their usual occupation for more than 10 hours a week.
Duty based
Unable to carry out one duty, or combination of duties, which are critical to the proper performance of their usual occupation.
Advisers
Want the professional package to include all white collar occupations.
Clients
Want personal, tailored solutions.
Income Protection – the challenge
Income Protection – the solution
Professional and white collar occupations have no requirement to be totally disabled during the waiting period to qualify for a “partial disability benefit”.
Day 1
Partial disability from Day 1
Day 30
No offsets for professional and white collar occupations.
Income from workers compensation, accident and public liability schemes.
Advisers
Want the choice to offer a quality Standard Income Protection plan.
Clients
Want a quality, affordable Income Protection plan.
Income Protection – the challenge
Income Protection – the solution
All Partial Disability Benefits are payable for the Full Benefit period until the plan expires.
Income Protection Standard
2 year
5 year
to age 60
to age 65
Temporary Salary Continuance
2 year
to age 65
Advisers
Want TPD eligibility as highly subjective.
Clients
Want greater certainty that genuine claims will be paid.
Total & Permanent Disablement – the challenge
Total & Permanent Disablement – the solution
The definition of TPD now includes the objective measure of the insured’s ability to earn income.
Definition
The insured person is totally and permanently disabled if, “the illness or injury means that the insured person is unlikely to ever work in any regular remunerative work for which they are reasonably fitted by education, training or experience, and which allows them to earn greater than 25% of their pre-disability income”.
Advisers
Want flexibility to package according to individual client need and simple underwriting solutions.
Clients
Want affordable cover they can understand.
Trauma – the challenge
Trauma – the solution
• Separate full benefits from Partial Benefits.• Create a comprehensive Partial Package as an option.
Partials Package Option
Trauma Cover Optimum
Trauma Cover OptimumCovers 48 “Full” conditions
Children’s Trauma Cover
Covers 18 “Partial” conditions
Covers 20 “Full” conditions
Partials Package Option
Trauma Cover Standard
Trauma Cover StandardCovers 15 “Full” conditions
Children’s Trauma Cover
Covers 18 “Partial” conditions
Covers 20 “Full” conditions
Full Benefit Package Full Benefit Package
Trauma – the solution
Short form conversion for all existing trauma plans to Trauma Cover Optimum
• Crisis Care• Crisis Care Advanced• Trauma Advanced• Trauma Standard
Application only• Trauma Premier
Access to AMP Flexible Protection
AMP Flexible Super
• Simple product• Investment choice – low cost• Modular features• No commission on investment component• AMP will undertake the paperwork / consolidation follow-up • Multiple insurance solutions – choice
Flexible Protection (Life)
• Flexible Protection - Our full retail insurance offering, including underwriting, multiple commission option eg upfront from 130/11% to level 30.3%/30.3%.
Income Protection & Temporary Salary Continuance
Summary
Partial Disability from Day 1
Zero Offsets
Dual Disability Definition
Partial Disability to Expiry
Trauma Feature
Entry Ages
Interim Cover & Cooling Off Period
Death Cover, Trauma, TPD
Funeral Benefit
25% TPD Definition
Trauma Optimum & Partials Package
Hepatitis B & C Occupationally Acquired
Cancer Definition
Enhanced Trauma Definitions
Children’s Trauma Cover
Entry and Expiry Ages
Cooling Off Period