Strong returns built on VitalityComment on this story
Johannesburg - It is more than just a loyalty programme. The more Discovery Group customers engage in the Vitality programmes, the less they have claimed on their medical aid, life insurance and even short-term insurance.
The company claims savings as a result of Vitality totalled R356 million in the six months to December last year. Lapsed savings stood at R219m.
The number of Discovery customers engaging in the Vitality programme has increased 211 percent for silver members, 475 percent for gold members and 650 percent for diamond members since 2008.
Now the insurer is moving to make Vitality a global brand. It is looking for international partners that can integrate Vitality in to their own products and has secured major international publicity on Sky News sport bulletins.
Vitality is a wellness programme that encourages people to get healthier by rewarding them with premium discounts, shopping and travel rewards, among other things.
In July last year, the start of the first half for which it reported results yesterday, the insurer announced that it had formed a joint venture in Singapore with the AIA Group.
AIA Vitality was born and the AIA distribution and life insurance products carried the Vitality brand. AIA Vitality began its pilot in Australia and Singapore.
“I see Vitality with a number of international partners. We want to build an international network of Vitality,” group chief executive Adrian Gore said. The Vitality programme now has over 5 million members in South Africa, the UK, US, China and Singapore.
In the UK, Vitality was integrated across the PruHealth and PruProtect businesses during the period under review. Gore said customers’ engagement had been notably strong. Discovery offered premium discounts of up to 40 percent.
In the six months, Discovery invested 9 percent of its operating profit in new businesses, including Vitality, Discovery Insure and the Ping An Health business in China.
But as much as Gore is bullish about Vitality, he was more confident about Discovery Health’s prospects. The group’s health division has South Africa’s biggest medical scheme covering 2.6 million lives. “People are joining us in massive numbers and they are not leaving,” Gore said.
The Discovery Health Medical Scheme generated a R1.4 billion surplus last year and has managed to grow its solvency to 24 percent, only 1 percentage point below the minimum required under the medical schemes regulations.
The scheme’s loss ratio decreased to 97.2 percent last year from 101 percent in 2011 as a result of its members’ engagement with Vitality. Policy lapses decreased to 4 percent last year from 4.1 percent in 2011.
The model of encouraging good behaviour has not only worked for Discovery on wellness, but on short-term insurance too.
The company said Discovery Insure’s loss ratio, including fuel, was 23 percent lower than the previous year.
Gore said because the Vitality Drive initiative was making members drive better, it had attracted more good drivers and the quality of members was exceptional.
“We are not about cheap but quality insurance… We don’t like to compete on price but in our segment of the market, we are competitive,” he said.
Discovery Holdings grew its new business by 19 percent to R5.9bn in the six months. Profit from operations increased by 25 percent to R2.38bn and normalised headline earnings rose 22 percent to R1.7bn. The stock fell 1.44 percent to R77.50. - Business Report