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Over the many years that Discovery has operated its Vitality loyalty programme, the accumulated data has shown indisputably that the programme has been highly effective in improving members’ health and lowering medical aid claims rates.

So can loyalty programmes change behaviour when it comes to saving for retirement?

At the International Actuaries’ Association Colloquium 2019, held last week at the Cape Town Convention Centre, Nathea Nicolay, head of product at Sanlam Reality, showed that a loyalty programme can be effective in improving outcomes for retirement fund members.

She said the newly implemented retirement default regulations, which essentially aim to get people to preserve their savings, instead of cashing them in when they change jobs, might not be enough to change behaviour.

Nicolay referred to American financial planner David Bach’s observation that our indulgence in small luxuries, such as a daily take-away latte coffee, and reluctance to delay gratification, were at the root of the retirement crisis.

Sanlam Reality is a lifestyle programme available to all Sanlam group clients. You are rewarded for “good” behaviour in the form of points, which accumulate towards a status of Bronze, Silver or Gold.

In turn you receive benefits and special offers, which increase according to your status. “Daily treats” are discounts on movie tickets or gym membership, while more substantial benefits are rebates on investment management fees, with a 15% rebate on Bronze, 50% rebate on Silver, and 100% rebate on Gold.

Nicolay says the points and status levels of such programmes appeal to our competitive nature, the daily-treat rewards assuage our instant-gratification tendencies, while the investment benefits improve our long-term savings prospects. But the fear factor also comes into play: there’s the fear of losing out on a good deal and, through the programme’s ongoing digital communication with members, which boosts awareness, the fear of hardship in retirement.

All this has led to lower policy lapses and fewer transfers to other providers. Nicolay showed that lapse rates of retirement annuity policies were 25% lower among Reality members compared with non-Reality clients. The difference was greater among people over 35: 26% in the 35-54 age bracket and 32% in the 55-70 bracket, compared with 20% among under-35s.

And Reality members saved more towards their retirement: they put away 16% of their salaries versus 12% saved by non-members.

In conclusion, Nicolay told actuaries at the colloquium not to underestimate the power of behavioural science in a world driven by the digitally empowered individual customer. “Loyalty programmes are effective in driving higher profits for insurers as well as higher savings for individuals,” she said.

PERSONAL FINANCE