Marketing Financial Services to the Over 50s

A Datamonitor report Marketing Financial Services to the Over 50s Published: Dec-04 Product Code: Providing you with: Use this report to Better plan your business strategies with the help of in-depth analysis into the financial behavior, needs and preferences of the over 50s Analysis of the UK financial market and over 50s in the UK Data provided by Mori FS, analyzed with respect to three age groups 50 to 64 years; 65 to 74 years; 75 years and over Data analyzed with respect to different household income bands Analysis of retail banking, general insurance, life and pensions and savings and investment www.datamonitor.com/financial

An introduction to the report 19.8 million people in the UK were aged 50 and over in 2002. By 2031, the over 50s population will have increased by a further 37 per cent, according to the ONS. In vying to attract and secure this significant customer segment, financial services institutions will need to fully understand the financial needs and attitudes of the over 50s. This report will be essential reading to organizations seeking to improve their product offering through customer segmentation. The wide range of financial services covered in this study means that it will be of use to banks, building societies, insurance companies, life assurance providers, brokers and asset managers. Within these organizations, the following will find this report of interest: strategic planners, heads of customer strategy, business development managers, business analysts, researchers, product managers and marketing managers. Key findings and highlights While taking into consideration the various life-changing events contributes enormously in better addressing the needs of senior customers, players must ensure they stay tuned with the undergoing changes among the over 50s. Many marketers tend to ignore the changes happening among senior customers and often take them for granted. Similar to the population as a whole, the over 50s are shifting towards combined contents and buildings insurance products, rather than contracting standalone household insurance products. Ownership of combined household insurance has increased from 2000 to from 39 to 49 per cent respectively. Older consumers' aspirations are much more personal than those of younger consumers. For example, a younger consumer may want to look highly fashionable, whereas someone in their 60s is more likely to want to look good for their age. Rather than showing all-too-youthful 60-year olds, marketers should play on the pride of being older. Reasons to buy Better plan your business strategies with the help of in-depth analysis into the financial behavior, needs and preferences of the over 50s Know your competitors better with our exclusive information on what other players are doing with respect to the over 50s Benefit from our recommendations on how to better target this important customer group Contact us... From Europe: tel: +44 20 7675 7366 fax: +44 20 7675 7016 email: fsinfo@datamonitor.com From Germany: tel: +49 69 9750 3119 fax: +49 69 9750 3320 email: deinfo@datamonitor.com From the US: tel: +1 212 686 7400 fax: +1 212 686 2626 email: usinfo@datamonitor.com From Asia Pacific: tel: +61 2 9006 1526 fax: +61 2 9006 1559 email: apinfo@datamonitor.com

www.datamonitor.com/financial Sample pages from the report Product Holding and Distribution Channels 11 per cent of the over 50s are planning to top up, take out or change their household insurance Household insurance is expected to undergo significant changes among the over 50s, especially among the pre-retired where 15 per cent stated they were either going to change, top up or take a new household insurance policy. There are various plausible explanations for this, such as: Product Holding and Distribution Switching to a cheaper insurance Channels policy; Some over 50s are planning to downsize; Investing in house extension projects; Figure 25: Average value of savings increased with higher income groups, Moving from standalone building and household policies to a combined one as seen previously, there is a tendency among the over 50s to take combined policies. 120,000.0 112,802 More than 10 per cent in the pre-retired 100,000.0 group are planning to Product Holding 85,634and Distribution modify their savings and investments portfolios 80,000.0 Channels Similar to general insurance, the over 50s are more likely to alter their savings and 60,000.0 53,414 investments portfolios. This is not surprising, given that this customer group holds a significant amount of wealth and is more likely to modify their portfolios, 39,378most 40,000.0 Segmentation by age showed that motor insurance is more popular among the probably by topping up their existing portfolios or by taking new products rather than 50 to 64 age group changing provider. This is the case because, as covered previously, 19,954 20,000.0 the over 50s tend to take their savings and investments products with their existing provider, asthe analyzed data logically highlights that motor insurance has a higher penetration they already know what to expect in terms of quality of service. 0 among the young end of the over 50s, with 74 per cent having such an insurance. 0 Elderly customers are less likely to have a motor insurance as many stop driving The above predicted future behavior of the over 50s further confirms the hugemainly because of health deterioration. potential of this specific customer base. The pre-retired group appears to offer more opportunities in the sense that they are active within a larger spectrum of products. Figure 17: Motor insurance cover is very high among the 50 64 years However, the retired group and to a lower extent the elderly retired also provide an group, attractive segment for general insurance providers and savings and investment Income bands providers. 75+ Note: The base is over 50s who have savings. None of these Weighted average value of savings ( ) Source: Datamonitor, MFS Under 15,499 15,500-24,999 25,000-39,999 40,000-49,999 50,000+ DA TA MO NI TO R Motor insurance 65-74 Combined contents and Simple products such as ISAs and premium bonds are among the favored buildings insurance 50-64 products Home building Analysis of the different types of savings and investment insurance product showed that simple products such as ISAs, premium bonds and stocks and shares are preferred by Datamonitor (Published 12/2004) Page 71 Home contents seniors. The fact that ISAs offer tax incentives is mainly accountable for their high This report is a licensed product and is not to be photocopied insurance take-up, as is the fact that they are relatively easy to understand. There is a lower tendency for the over 50s to opt for more complex products such 0.0% as 10.0% unit trusts, 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% probably because such products can be confusing to understand, especially for those Percentage of respondents who are not financially savvy. Note: Please refer to the Appendix for corresponding data. However, MFS data also shows that the over Source: 50s Datamonitor, are more MFS likely to have more D A T A M O N I T O R complex products than the population as a whole. For instance, ownership of Income segmentation revealed that insurance cover increases with higher income Datamonitor (Published 12/2004) Page 67 This report is a licensed product and is not to be photocopied Segmenting the over 50s by income showed that penetration of general insurance increased with higher income earnings. Since higher income earners generally have more disposable income than lower income groups, it is likely that the former will be in a better position to afford non-compulsory insurance products. With regard to compulsory insurance such as motor, penetration is relatively low in the lowest income group as not many customers in this income band are able to afford a car. Datamonitor (Published 12/2004) Page 55 This report is a licensed product and is not to be photocopied Request more sample pages...for FREE! 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Table of contents EXECUTIVE SUMMARY INTRODUCTION What is this report about? Who is the target reader? How to use this report THE OVER 50S POPULATION Demographic trends - The UK: an aging population - Seniors are the most affluent age category Life-changing events after 50 - Life events after 50 act as a catalyst for changes in attitude, interests and consumption behavior - Life-changing events for over 50s are far from static - Conclusions Segmenting the over 50s - Datamonitor's segmentation of the over 50s Conclusions PRODUCT HOLDING AND DISTRIBUTION CHANNELS Product holding among the over 50s - Retail banking - General insurance - Life insurance and pensions - Savings and investments How the product holding of the over 50s is likely to change in the next five years? - Motor insurance will change as the over 50s grow older - 11 per cent of the over 50s are planning to top up, take out or change their household insurance - More than ten per cent in the pre-retired group are planning to modify their savings and investments portfolios - Analysis by income band confirms that general insurance and savings and investments are most likely to witness major changes Distribution preferences of the over 50s - Retail banking - General insurance - Life insurance and pensions - Investments Conclusions FACTORS INFLUENCING PROVIDER CHOICE Retail banking - Current accounts: major providers and reasons for choice - Credit cards: major providers and reasons for choice General insurance - Who are the major general insurance providers among the over 50s? - What factors motivate the over 50s in choosing a general insurance provider? Life insurance - Who are the major providers for life insurance among the over 50s? - What factors motivate the over 50s in choosing a life insurer? Savings and investments - Who are the major savings providers among the over 50s? - What factors influence the over 50s in choosing a savings provider? Conclusions RECOMMENDATIONS FOR TARGETING THE OVER 50S Which financial products are worth targeting? - Is it worth offering better rates in order to retain switchers among the over 50s? - Should banks concentrate their efforts on offering package products to the over 50s? - Credit cards: providers should concentrate their efforts on securing the pre-retired customer base - Mortgages: senior customers with a significant amount of savings can help their offspring with their mortgage - Household insurance: consider segmenting the over 50s customer base by income - Motor insurance: pay as you drive for the retired? - Life insurance: rebuilding trust is critical - Savings and investments offer a window of opportunity to the over 50s Communicating with the over 50s - How to communicate better with the over 50s? Conclusions APPENDIX TABLES Table 1: UK population segmented by age (000s), 1998 to e Table 2: General insurance cover among the over 50s, by income segmentation, Table 3: Which products will you consider changing, taking out or topping up in next 5 years, split by age group, Table 4: The future behaviour of the over 50s as regards to topping up, taking or changing financial products in the next five years, split by income band,...more over 50s take adventure holidays than younger people, more over 50s own fast cars than younger people. This is something that is often forgotten by those responsible for marketing...

www.datamonitor.com/financial Table 5: Channels used by the over 50s to initiate the first approach to credit card providers, split by income bands, Table 6: Reasons mentioned by the over 50s for preferring face-to-face contact, Table 7: Channels used by the over 50s to arrange their motor insurance, split by age group, Table 8: Channels used by the over 50s to arrange their motor insurance, split by income band, Table 9: Channels used by the over 50s to arrange their household insurance, split by age group, Table 10: How the over 50s arranged their life policies, by age group, 2001 and Table 11: Top 5 most used current account providers among the over 50s, split by age group, Table 12: Current accounts satisfaction level among the over 50s, split by various factors, Table 13: Reasons mentioned by the over 50s for choosing their credit card/s, split by age groups, Table 14: Spontaneous awareness of the brand of banks and building societies, Table 15: Top five general insurance providers among the over 50s, split by age group, Table 16: Reasons given by the over 50s for choosing their life insurer, split by age group, Table 17: Previous experience with the savings and investments provider is the dominant factor in all age groups within the over 50s, Table 18: Methods used by the over 50s for finding out information about a particular financial product, Table 19: Expected further number of years of life at ages 50 and 65, 2004 Table 20: Ownership of retail banking products among the over 50s, 2000 and Table 21: Ownership of retail banking products among the over 50s, segmented by age group, Table 22: Ownership of retail banking products among the over 50s, segmented by income band, Table 23: Ownership of general insurance products among the over 50s, 2000 and Table 24: Ownership of general insurance products among the over 50s, segmented by age, Table 25: Type of life policy held by the over 50s, Table 26: Ownership of life assurance among the over 50s, segmented by age group, Table 27: Ownership of pension among the over 50s, 2001 and Table 28: Ownership of pension schemes among the over 50s by type, 2001 and Table 29: Reasons mentioned by the over 50s in employment for not having a pension, Table 30: Reasons mentioned by the over 50s in employment for not contributing in a pension, segmented by income band, Table 31: Types of investment held by the over 50s, split by age group, Table 32: Channels used by the over 50s for initial contact with current account providers, split by age group, Table 33: Channels used by the over 50s to initiate first approach to credit card providers, split by age group, Table 34: Channels used by the over 50s to arrange their motor insurance, split by income band, Table 35: Channels used by the over 50s to arrange their household insurance, split by income band, Table 36: How the over 50s arranged for their life policies, by income band, Table 37: How the over 50s made their initial approach to their life insurer, by age group, Table 38: Who arranged your investment products?, Table 39: Channels used by the over 50s to approach their savings and investment products provider for the first time, 2000 and Table 40: Reasons mentioned by the over 50s for choosing their current account provider, segmented by income band, (part 1 of 2) Table 41: Reasons mentioned by the over 50s for choosing their current account provider, segmented by income band, (part 2 of 2) Table 42: Reasons given by the over 50s for choosing their credit card/s, split by age group, 2000 Table 43: The length of time the over 50s have held their current credit card, split by age groups, Table 44: The proportion of over 50s having cancelled a credit card during the last 12 months, split by age groups, Table 45: Reasons given by the over 50s for holding their current credit cards, segmented by income band, (Part 1 of 3) Table 46: Reasons given by the over 50s for holding their current credit cards, segmented by income band, (Part 2 of 3) Table 47: Reasons given by the over 50s for holding their current credit cards, segmented by income band, (Part 3 of 3) Table 48: Most used providers among the over 50s for general insurance products indexed to Norwich Union's percentage response, Table 49: Reasons mentioned by the over 50s for choosing their general insurance provider, split by age groups, Table 50: Reasons mentioned by the over 50s for choosing their general insurance provider, split by income band, Table 51: Reasons mentioned by the over 50s for choosing their motor insurance provider, segmented by age group, Table 52: Reasons mentioned by the over 50s for choosing their motor insurance provider, split by income band, Table 53: Reasons mentioned by the over 50s for choosing their household insurance provider, split by age group,...as customers think more broadly about their retirement income, they will consider new ways of making provision for retirement that go beyond the traditional pension...

Table 54: Table 55: Table 56: Table 57: FIGURES Figure 1: Figure 2: Figure 3: Figure 4: Figure 5: Reasons mentioned by the over 50s for choosing their household insurance provider, split by income band, Reasons given by the over 50s for choosing their life insurance provider, split by income band, Other reasons mentioned by the three age sub-groups for choosing the savings and investments provider, What channels of communication do you believe will be successful in reaching seniors? 52 per cent of the over 50s are in the 50 to 64 age group, 2002 Combined contents and buildings insurance is replacing standalone household products among the over 50s, 2000 and The average savings value among the over 50s is more than 25,000 for the three age sub-groups, Face-to-face is the preferred channel but the post is also used to initiate the first contact to credit card providers, Insurance specialists lead the way, but over 50s specialists Saga and Age Concern also have a strong presence among the over 50s, Figure 6: Life expectancies for UK women and men aged 50 and over are increasing, 1999 to 2020 Figure 7: 52 per cent of the over 50s are in the 50 to 64 age group, 2002 Figure 8: 63 per cent of wealthy individuals were aged 56 and over in Figure 9: The highest proportion of net wealth is concentrated among older people, 2002 Figure 10: The over 50s are now more willing to get into debt, 2004 Figure 11: The Plan from the Pru addressing life-changing events to serve customers better, October 2004 Figure 12: Structure of chapter 4 'Product holding and distribution channels', 2004 Figure 13: Current accounts are still the most popular product among the over 50s with a higher penetration in, 2000 and. Figure 14: Unsurprisingly, ownership of retail banking products is highest among the 50-64 years group Figure 15: Penetration of credit cards increases with a higher household income band, Figure 16: Combined contents and buildings insurance is replacing standalone household products among the over 50s, 2000 and Figure 17: Motor insurance cover is very high among the 50-64 years group, Figure 18: Whole life policies remain popular but penetration is lower than in 2000, 2000 and Figure 19: Figure 20: Figure 21: Figure 22: Figure 23: Figure 24: Figure 25: Figure 26: Figure 27: Figure 28: Figure 29: Figure 30: Figure 31: Figure 32: Figure 33: Figure 34: Figure 35: Figure 36: Figure 37: Figure 38: Figure 39: Life assurance products have the highest penetration among the 50 to 64 age group, Ownership of pension schemes among the over 50s increased by three per cent from 2001 to, 2001 and Penetration of employer pension schemes increased further in, 2001 and 27 per cent of the over 50s in employment stated that they are not contributing in a pension since they do not have any spare money to do so, As expected, those in low income groups do not contribute in a pension mainly because of no spare money, The average savings value among the over 50s is more than 25,000 for the three age sub-groups, Average value of savings increased with higher income groups, ISAs are the preferred savings product among all age sub-groups within the over 50s, Face-to-face is the most used medium among all age sub-groups for current accounts, Face-to-face is the preferred channel but the post is also used to initiate the first contact with credit card providers, The majority of the 65+ arranged their life policy through their insurer's representative, The importance of IFAs increases for higher income bands, More than 80 per cent in all age groups initially made contact with their life provider face-to-face, 27 per cent of the over 50s arranged their investment products through an IFA, Face-to-face is the channel of choice for the over 50s when approaching their savings and investment providers for the first time, 2000 and Structure of chapter 5 'Factors affecting provider choice', 2004 Lloyds TSB is by far the leading current account provider among the over 50s, 'Near where I live' is the most cited reason for choosing a current account provider by the three age sub-groups, A greater number of customers have switched their current account from Barclays and Lloyds TSB during, 92 per cent of the over 50s are either fairly or very satisfied with their current account provider, Barclaycard is the leading credit card provider among the over 50s, For the full list of figures, email fsinfo@datamonitor.com with TOC in the subject line. Contact us... From Europe: tel: +44 20 7675 7366 fax: +44 20 7675 7016 email: fsinfo@datamonitor.com From Germany: tel: +49 69 9750 3119 fax: +49 69 9750 3320 email: deinfo@datamonitor.com From the US: tel: +1 212 686 7400 fax: +1 212 686 2626 email: usinfo@datamonitor.com From Asia Pacific: tel: +61 2 9006 1526 fax: +61 2 9006 1559 email: apinfo@datamonitor.com

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