Flexible solution for individuals to source insurance to meet their unique needs

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4 A Definition It is the process of offering individual or group insurance products for employees to purchase through an employer sponsored plan Flexible solution for individuals to source insurance to meet their unique needs Key characteristics: Elective in nature Offered at the workplace Employee paid

5 Optional Life Top up of employer-paid mandatory cover One and only option available to employees Cafeteria-style flex program Range of options (packages) High degree of employee choice but can get complex Employer contributes fixed $ amount Worksite Marketing Programs Holistic look at employee needs and insurance gaps Education and decision support Efficient education and enrolment process Range of benefits to suit individual needs

6 Gen Y (20s to mid 30s); Gen X (late 30s to late 40s); Generation Jones (late 40s to late 50s) and Baby Boomer (late 50s to late 60s) Insurance needs are very different Mid-40 s = single, married, children, no children Older age workers and labour crunch need to retain expertise One-size-fits-all program will no longer meet the needs of diverse workforce Seen more and more as a retention\recruiting tool

7 Ageing population and rising health costs Employers under benefit cost pressure State and employer provided benefits being cut back Higher out of pocket expenses for individuals Higher personal debt load Employer provided group life insurance low (1-3 times salary or flat cover) Insurance agents/advisors target higher amounts of cover LIMRA 2013 Canada Insurance Ownership

8 Key Results Lowest level of life insurance ownership in 30 years 30% carry no life insurance on anyone in household 45% - they are underinsured, including 33% with >$100,000 income Decline in ownership in all income brackets Households with only group life more likely to be underinsured Concern with Reducing/paying-off debt 80% carrying some debt in retirement - averaging $100,000 2/3 rd don t have anyone they consider personal insurance advisor * LIMRA 2013 Canadian Insurance Ownership Survey, November 2013

9 Key target segment 68% - immediate trouble if breadwinner dies prematurely Limited savings or assets life insurance best option 25% - considering purchasing insurance in next 12 months All Households: feel they require 6 years of replacement income Type of Insurance % owning Mean $ Owned Replacement (yrs.) Individual only 27% $224, Group only 37% $179, Both 36% $447, All 100% $290, * LIMRA 2013 Canadian Insurance Ownership Survey, November 2013

10 Middle Income market in the workforce Their spouses Recognizes the unique needs based on stage-of-life single parents, older singles, married with children, retired part-timers Offer products not typically offered to individuals selfemployed, part-time workers Lower Marketing costs Lower Distribution costs

11 Employer/HR Cost savings to company - Addresses gaps in existing benefits plan Minimal involvement \ administration Integrated with employer-provided cover Effective tool to recruit and retain employees Broker Additional revenue stream with minimal disruption to existing employer relationship Strengthen client relationship Employee Convenience of purchasing at work Access to low cost coverage Simple process to apply for and enrol Efficient method to pay premiums, ideally payroll deduction Insurer Higher margin business, as compared to mandatory employerpaid cover Additional revenue Quality business (good persistency)

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13 Marketing Use of technology to educate and raise awareness of un-met needs Coordinate with and efficient use of face-to-face and call centre resources Financial Literacy increase awareness of gaps Broad range of benefits based on individuals in target market Efficient enrolment, administration and billing Increase penetration Expense savings (overhead, including underwriting) Underwriting aligned with the risk profile of underlying group Take account of actively-at-work provision Spread of risk under group contracts Selective use of pre-existing condition clause and waiting periods

14 Traditional group EB market declining 60% of group EB premium from voluntary employee-paid cover Enrolment via captive agents seen as way to enhance agent productivity Emerging market Benefit consultants are keen to develop Limited product offering mainly PA \ Accident covers Not well developed except in Colombia & Mexico Broad range of products and profitable Some insurers participate in VB and not compulsory EB market Ancillary benefits to employee s pension plan Much larger than compulsory EB programs Liberal eligibility + poor definition + sub-par claims management = industry in turmoil Substitute for ER paid coverage Comprehensive (but inadequate level) benefits for employee & family Witnessing growth of flex\voluntary market Let s take a closer look

15 Group Market dominated by a handful on insurers Universal & Comprehensive Public Health Care system Similarity in the Employee Benefits insurance coverage Products: Life, Income Protection, Accidental Benefits Amounts UK Economy hit hard by the GFC Forced Employers to look at alternatives UK Pension Reform is creating a platform for further growth of flex\voluntary

16 Employers cutting back on LTD coverage Shorter Benefit duration Lower replacement ratio Some Voluntary programs allow Employees to Flex & Stretch Higher replacement ratio and\or Longer benefit period Steady increase in premiums coming from flex\voluntary program From < 5% pre 2008, Life and Disability premium now just over 10% of total EB premium Almost 50% of CI premium comes from Flex/voluntary programs

17 Market emerging and at key point for carriers to become early entrants and leaders True voluntary products rare with most carriers offering top-ups Brokers role will need to be closely considered in VB evolution Employers beginning to show interest Need to cut\control benefits costs But not very aware of availability or value of VB Almost 50% of carriers believe VB important part of strategic plans Most carriers believe VB will grow faster than group market over next five years * East bridge/rga joint research ( )

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