Press Release. NEW STUDY SHOWS OVER 50s INSURERS POCKET 86m AS CUSTOMERS LOSE 173m OF LIFE COVER IN 2014

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1 Press Release 17 June, 2015 NEW STUDY SHOWS OVER 50s INSURERS POCKET 86m AS CUSTOMERS LOSE 173m OF LIFE COVER IN 2014 Study finds 173m of life cover was lost in 2014 through Over 50s plan cancellations 52,000 Over 50s customers forced to waste 86m of life cover premiums in 2014 The mutual blames unfair and inflexible products, and urges Over 50s providers to act New research by Royal London - the UK s largest mutual life, pensions and investment company - reveals almost a third (28%) of UK adults who purchase Over 50s life insurance cancel their policy. The study by YouGov indicates 173m of life insurance was lost in 2014, because 52,000 people cancelled their Over 50s policy. In terms of premiums paid, collectively this represents 86m of customers wasted cash. The mutual commissioned the study which surveyed over 1,400 UK adults - to establish the extent to which Over 50s life insurance customers miss out on protection through the cancellation of their policies. It also wanted to assess customers motives for lapsing and the emotional effect of their decision. Today Royal London publishes a report ( High and Dry") which summarising the findings. It says the study highlights six issues which can t be solved by one provider, they need attention from a united industry: The rate of policy cancellations in the Over 50s life cover market, and effect on customers, is alarming; Cancellations are often driven by financial difficulties, and leave customers poorer and unprotected; The market place is crowded and can be confusing for consumers; Cancelling a policy is an all too quick and easy process, which drives profit for insurers; Most policies lack safety features which customers need product standards need a major rethink; The market needs more customer-focused products, designed for customer needs not maximum profit. The mutual says the study highlights the extent to which some UK providers are abandoning Over 50s life insurance customers at a critical time, as they struggle to keep up payments. The findings indicate many customers who cancel their Over 50s life cover are financially vulnerable; for example, a quarter (25%) who lapsed their policy have no savings or investments. Although a third (33%) of customers chose to cancel their Over 50s policy because they no longer needed it anymore, a fifth (20%) of policy-holders said it was due to long-term money issues. Two in five people (40%) cancelled either because they couldn t afford their premiums or because they needed to prioritise other bills instead heating/energy and mortgage/rent were key priorities.

2 Commenting on the new study, Jerry Toher, CEO of Royal London s Consumer Division said: This research highlights how poorly designed products affect customers, especially those on low incomes; and confirms why the Over 50s life cover market must change current practices. I want to see the market remodelled - from the way products are designed, to the customer journey and how this type of insurance meets people s real needs. I m immensely proud of how Royal London has started to address some of the issues (for example our Protected Payout feature, and the ability to reduce premiums) but I remain saddened by the fact we are the only UK insurance firm offering sensible safety features. I hope our innovative work in this space, combined with the publication of independent research, inspires other UK life insurers to reassess how they operate in the Over 50s market. Royal London invites consumer organisations and industry experts to review the new evidence and revisit this product sector. It urges Over 50s life cover providers to consider how they can address the following: Improve customer outcomes by designing fairer products which better reflect consumers needs; Be more transparent about the options open to a customer in the event they have financial problems; Proactively offer pragmatic assistance to help people who wish to cancel due to financial hardship; Rethink the cancellation process, to support those who want to keep their cover but struggle to pay. Jerry added: Not all Over 50s life insurance policies are the same - the underlying details can make thousands of pounds of difference to a customer. We urge customers considering this type of protection to shop around. But don t just compare the price - take time to understand the product features and how it works to prevent getting caught out. Armed with this new evidence, we are investigating how we can help more customers reach better outcomes, for example establish ways to better serve customers facing financial hardship. We now invite other organisations working in this space to respond and suggest ways to improve our market, so it works better for customers. A sea-change is within sight, but requires collaboration: commitment from providers, insight from consumer bodies on the frontline, and support from impartial advice organisations. Other key findings Although at the time of cancelling many (25%) customers said they felt a strong sense of relief afterwards, a significant number (18%) felt regretful or sad, and some (10%) admitted they felt worried, confused or nervous after cancelling.

3 The majority (82%) are satisfied they made the right decision. However, two in five (41%) people reported they felt unhappy to have lost premiums they had paid, especially if they d held the policy for a long time; unhappiness levels rose to 45% among those who had held the policy for over three years. Among those who cancelled because they couldn t afford the premium, the majority (80%) said it was due to long-term money issues, rather than a sudden or unexpected financial issue. Top Tips: questions customers should ask insurers before committing to purchase an Over 50s policy. 1. How flexible are the payment terms, for example: does the insurer allow you to reduce your premiums? Flexible payment terms could be advantageous if you experience financial problems in the future. 2. Does the policy offer you any cover (cash sum) if you stop paying premiums mid-way through? Knowing whether your cover (cash sum) will be lost or protected if you cancel can bring peace of mind. 3. How quickly does the provider cancel your cover if you miss one payment? Be aware of how long you ll have to catch up on any missed payments providers terms will differ. 4. How soon after your policy begins would it pay out in the event of your death? Know whether the provider would pay out (to your loved ones) after the first or second year of policy. 5. How long does the provider make you pay for? A shorter payment period (up to age of 90 instead of forever ) could save you money in the long-term. Case Study: Avril s story Avril, who is 69 and lives in Somerset, retired earlier than planned due to stress. She received a teacher s pension but was not yet eligible for her State Pension. To supplement her income Avril worked part-time but money was tight (especially as her mortgage won t be paid off until she is in her 80s) and she gradually found herself getting into debt. To make ends meet, Avril cut back on heating and food and cancelled her over 50s SunLife life insurance policy which she d had for two years. The regular premiums were small but on several occasions had tipped her over her overdraft limit and she d ended up paying hefty bank fees. This was a constant worry for her. Financially, I was really on a knife-edge. I had to find ways to cut back. My over 50s insurance policy was just one more thing I could do without. I needed to regain some control over events. Cutting back felt like a positive thing to do says Avril. She wasn t aware at the time that it was possible to take a payment pause. If she had known about this she says she might have considered it.

4 Avril sought free debt advice and once her State Pension kicked in she managed to get her finances back on track. She still needs to work to get by but doesn t know how long she ll be able to continue or how she ll manage once she has to stop work. My present finances are fine but they re dependent on me being able to work. I m not sure how long I ll be able to carry on doing this. Once I have to give up work I don t know what will happen. ENDS NOTES TO EDITOR: 1. Read the report (from 17 June) at: 2. Royal London is working with industry experts who also want to see market failings addressed (organisations including Fairer Finance and Defaqto) and hopes this new evidence will prompt others to join its quest to shake up the Over 50s market. 3. Methodology: The YouGov study comprised qualitative and quantitative research: i) Dec 2015: nationally representative omnibus survey of 1,164 UK adults aged over 50 to determine how many had cancelled their policy. ii) Jan-Feb 2015: online survey of 250 customers (UK adults) who had bought an Over 50s life insurance policy, but subsequently cancelled their policy before it matured. iii) Jan-Feb 2015: in-depth qualitative interviews of 1.5 hours with 10 lapsed customers (of various policy durations) to examine people s motives for lapsing and the emotional effect of their decision. Wiltshire Citizens Advice assessed each of the 10 qualitative cases when cancellation was due to financial adversity to identify where impartial advice or assistance could have helped m calculated as follows: number of UK adults who cancelled an Over 50s life cover policy in 2014, multiplied by proportion of customers who lost full cover, multiplied by average cover level (22.7m x 2% x 12% x 60% x 5,507 =52,664 x 60% x 5,507 = 173m). Full explanation: (i) UK adults aged over 50 = 22.7m (Source: GB/Factsheets/Later_Life_UK_factsheet.pdf?dtrk=true). (ii) YouGov survey of 1,164 UK adults found 2% of people aged 50+ had bought but subsequently cancelled an Over 50s life insurance policy. (iii) YouGov survey of 250 people aged 50+ who had cancelled an Over 50s policy found: a) 12% cancelled their policy in b) the average cover level for a customer who cancelled = 5,507. c) 60% of people cancelled after holding policy for 2 years, therefore lost full amount of cover m calculated as follows: number of people who cancelled in 2014, multiplied by average amount of premiums a customer had paid: (22.7m x 2% x 12%) x ( 19 x 12 x 7.2) =52,664 x 1,629 = 86m).

5 Full explanation: (i) UK adults aged over 50 = 22.7m (Source: GB/Factsheets/Later_Life_UK_factsheet.pdf?dtrk=true). (ii) YouGov survey of 1,164 UK adults found 2% of people aged 50+ had bought but subsequently cancelled an Over 50s life insurance policy. (iii) YouGov survey of 250 people aged 50+ who had cancelled an Over 50s policy found: a) 12% of respondents cancelled their policy in b) the average premium that customers were paying = 19 a month. c) customers cancelled their policy, on average, after 7.2 years. 6. Royal London's Over 50s Life Cover allows customers to reduce their premiums at any time, and guarantees a 'Protected Payout' to customers halfway through their policy's term (if they need to stop paying premiums, at least half the cash sum will still be paid out on death. No other Over 50s provider offers this). More information at: 7. The underlying details of an Over 50s life insurance policy can make a difference of thousands of pounds, because different Over 50s life insurers have different payment terms. Some customers stop paying premiums aged 90 this means that a customer who buys a policy when they are aged 50, paying 20 per month, could pay up to 9,600 over the lifetime of their policy. Another customer, with a different provider, could stop paying premiums after 30 years, and pay up to 7,200 over the lifetime of their policy. In these scenarios, different payment terms could make a difference of 2,400. For further information, or to arrange an interview with Avril, please contact: Nancy Baynes, PR Manager: nancy.baynes@royallondon.com / / About Royal London: Royal London is the UK s largest mutual life, pensions and investment company, with Group funds under management of 86.3bn. Group businesses serve around 5.3m policy holders and employ 2,859 people. (Figures quoted are as at 31 March 2015). The Group is currently moving all of its UK businesses under a new version of the Royal London brand. The Group's independent wrap platform will remain branded