Online Insurance:

1
Online Insurance Extending British Success
2

• WHY THE UK?
• Major Insurance Market
• High Internet Penetration
• 25-Year Innovation in Distribution
• Impressive Online Insurance Growth

3
Major Insurance Market

• 1st European Insurance Market
• 2nd Insurance Market Worldwide
• 11 of Worlds premium
• More than 1000 Companies
• General Insurance Commercial Personal(motor
  and household)
• 33bn GBP of Net Premium (2007)
• Highly Concentrated
• Top 10 insurance groups with 71 market share
  (2007)
• Source ABI (Assoc. of British Insurers)

4
High Internet Penetration

• 70 of UK Population with Internet Access (2009)
• 65 of British People with Broadband Internet
  Access
• Source Ipsos Mori
• Potential Online Insurance Market
• 34m Adults (2008)
• 71 of UK Adult Population
• Source Office for National Statistics
• Online Insurance Demographics
• Young Adults
• High Income
• Source Datamonitor

5
25-Year Innovation in Distribution

• 85 - 1st Direct Phone Insurer is created
• 93 - Major Direct Insurer Innovator is launched
• 02 - 1st Insurance Aggregator is founded
• 03 - 1 Aggregator added Insurance Comparison
• 06 - 3 Insurance Aggregator started up
• Innovating with product feature comparison
• Nowadays
• Direct Line - 1 Motor Insurer and Top Household
  Player
• 100 Spontaneous Brand Awareness and Not Listed
  in Aggregators
• Aggregators - 40 of Motor New Sales and 30
  predicted growth
• Brand Awareness comparable to top Direct Insurers
• Source Datamonitor, Deloitte and EMB

6
Impressive Online Insurance Growth

• 02 - Notable Growth since 1st Aggregator was
  lauched
• 06 - 7m buyers
• 11 - 11m buyers expected
• 80 UK Mkt (ES IT DE NL SE) Mkt
  (expected 11)
• Based on Forrester Research predictions
• 60 New Direct Sales estimated to be online in
  08
• Source EMB
• 40 New Motor Sales generated by Aggregators
• 80 Consumers willing to visit an Aggregator
• Aggregators Doubled its Household instigated
  Sales
• But not meaninful yet, 4 of New Household Sales
• Estimated by Datamonitor 2008

7

• WHY IS SUCCESSFUL?
• Great for Consumers
• Intermediaries back in the game
• More Efficient for Insurers

8
Great for Consumers

• What Motivates Online Insurance Consumers?
• Money saving
• Insurance seen as causing reduction of current
  consumption pleasure (Ennew et al, 2007)
• Time saving
• 24/7 Availability, Home/Work Access and Ease of
  Use
• Choice
• Variety of Covers, Brands and Prices is the main
  of Aggregators
• Result High Customer Satisfaction

9
Intermediaries back in the game

• Brokers compete w/ Insurers for Online Consumers
• Brokers listed in Aggregators website benefit
  from their awareness
• Consumers do not quite understand the different
  types of distributions
• Bricks and clicks Intermediaries business
  model
• Intermediaries take advantage offline reputation
  and personalised service
• Aggregators The New Intermediaries
• Gocompare.com is member of BIBA (British
  Insurance Brokers Assoc.)
• New Online Intermediation Models
• Consumer - Aggregator - Insurer
• Consumer - Aggregator - Online Broker - Insurer
• Consumer - Online Broker - Insurer

10
More Efficient for Insurers

• Profit Underwriting Result Financial
  Result
• Underwriting Result Net Premiums - Net Claims
  - Underwriting Exp. - SGA Exp.
• Online Underwriting Exp. No/Lower Commissions
• Direct Online Sales No Commissions
• Aggregator/Broker Online Sales Lower
  Commissions w/ Aggregator Awareness
• Commissions vs. Ad Expense/Brand Awareness
  Investment
• Direct Line Huge Investment in Ad Campaigns
  and saves between 25-40 in Commissions (Peck et
  al, 1999)
• SGA Expenses Econ. of Scale in Policy
  Administ.

11

• ARE THERE CONS?
• Risks for Consumers
• Fierce Competition for Insurers
• Disintermediation for Brokers

12
Consumers Risks Fierce Competition

• What are the main Online Insurance Consumer
  Risks?
• Privacy risk Personal Info used w/o Consumers
  Authorization
• Personal risk Risk of using Credit/Debit Card
  Online
• Under cover Risk of not choosing the right
  policy
• Insurers Fierce Competition
• Insurers currently loosing money w/ Aggregators
• High Aggregators Technological Requirements
• Perfect Competition Characteristics in
  Aggregators
• Many buyers and many sellers - Perfect
  Information - Commoditised Products

13
Disintermediation

• Disintermediation is the Main Risk for Brokers
• Innovation in the quality of their service is
  the key to survive online
• Just commoditised insurance services can be sold
  online
• 97 - 07 Brokers Free Fall in Personal Lines
• From 55 market share in 97 to 34 in 07
• But the Online Channel is not the main cause
• Bancassurers have more than tripled their mkt
  share
• From less than 5 in 97 to 16 in 07
• Source ABI (Assoc. of British Insurers)
• Brokers still the single most important channel
• With the online channel Brokers can maintain
  this leadership

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LAST WORDS