Discovery Life’s innovative value propositions for retirees reward health and wellness behaviors
The company has launched an insurance model that promotes healthy behavior and risk reduction, creating value for the insurer and its policyholders.
Discovery Life, a South African life insurer and part of the Discovery group, parent of the Vitality wellness program, covers almost 500 000 South African clients. The company has launched an insurance model that promotes healthy behavior and risk reduction, creating value for the insurer and its policyholders.
Business challenge
In South Africa, increasing life expectancy puts retirees at significant insurance risk, and many struggle to find affordable premiums. Many senior citizens in South Africa lack insurance coverage, resulting in an insurance gap of over 50%. Additionally, they often have inadequate savings and limited government support for retirement funding. This exposure is exacerbated by the fact that these senior citizens are twice as likely to experience severe physical and health challenges that can significantly impact their lives after age 65 than before retirement.
Business solution
Discovery Life introduced the Vitality Age-reduction benefit to mitigate these challenges. Discovery Life’s Shared-value insurance model rewards clients with discounts on annual premiums when they manage their health and wellness. The Vitality Age-reduction benefit promotes healthy behavior pre-retirement by offering up to 2.5% lower annual premium increases, effectively providing the annual premium increases of a client 20 years younger. Combined with the discounts on premiums earned prior to retirement through Vitality, clients experience significantly lower premiums into retirement ensuring affordability and sustainability over time.
The model’s second value proposition is a cash conversion benefit that enables clients to monetize their health and wellness assets in retirement without compromising their protection. According to Discovery, an average policyholder can receive a return on premiums of 11.7% above CPI (Consumer Price Inflation), through 10 tax-free annual cash payments during retirement, effectively cashing in on your risk cover while still alive. In addition, this benefit is funded using pooling of risk mechanisms and , so is not affected by market performance.
Business impact
Improved customer engagement and satisfaction have led to better customer retention, with more policyholders maintaining their coverage and premiums into retirement. The benefit’s payout is only applicable when the policy remains in force. As a result, Discovery Life expects to improve persistency rates and boost new business value, margins, and profitability whilst at the same time providing a novel and effective solution to the retirement funding challenge for clients.
This case study is included in the 'The aging well opportunity: How trust and engagement can unlock growth for insurers' study. To find out more, download your free copy
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