From what we can see, Discovery Life is built on one fundamental pillar:
• Look after us by looking after yourself
Understand this concept when buying life insurance, and you’ve bought the most innovative life insurance product in the SA market (perhaps even globally). Misunderstand, and you could be making one very expensive mistake!
Let’s help you avoid that by understanding how Vitality and cover integration works
If we had to ask you what sort of business would you start if you had a few million Rand lying around; would you have said ‘a life insurance company’?
It sounds like risky business to us. A healthy young man or lady buys a million Rand’s worth of insurance from you. They have zero health issues, don’t smoke, hold down a responsible job, so sure, offering them a million Rand life insurance for R200 a month should have tons of them signing up.
But who knows what will happen tomorrow, never mind 20 years from now? It’s mind boggling to think you can pay R200 today and claim R1 million tomorrow.
20 years from now that same healthy young man is a middle-aged, overweight Executive with a heavy drinking problem, living on a diet of high blood pressure tablets, and under huge amounts of stress at work.
• If we knew then what we know now, and
• if we could rewrite that policy he took out 20 years ago with us
• We wouldn’t offer him the cover at even 10 times that price
So here’s this visionary individual – Adrian Gore – although we hope we ain’t giving him too much credit here since he must have had plenty sharp minds around him, who decides that he is going to incentivize people to look after themselves by rewarding them with lower premiums on their life insurance.
Imagine that for a moment…
• What if we could get that same 20 year old to hit the gym every day of his life for the rest of his life, and at the same time
• To belong to our Medical Scheme so that we can keep an eye on his health?
In that instant, or so it would seem to us as outsiders, Discovery Health branched out into the business of Discovery Life.
The big carrot on offer at Discovery Life
There’s a couple actually, but in this article we will focus on only two:
If you’ve ever attended a Discovery presentation, the one thing you’ll notice about Adrian Gore is that his face lights up whenever he mentions the word ‘Vitality’.
Make no bones about it – the ‘cash cow’ behind Discovery’s success is their health business, but this pales into insignificance compared to the potential of Vitality worldwide.
Imagine then if Discovery could:
• Get someone to join Vitality at an additional cost (which seems like money for jam)
• But in exchange offer discounted gym memberships, cheap flights, cheap hotel stays, and a host of other benefits from their various business partners
• These Vitality members then earn ‘rewards’ for having regular health check-ups, going to the gym every day, that sort of thing. The more rewards they earn, the higher up the ladder they progress, and the bigger the discounts become (Sounds almost like multi-level marketing to us!).
So what’s in it for Discovery?
Discovery gets a very accurate picture of the health of their clients. The guy who goes to gym every day, who has regular medical check-ups, is a far better risk than someone Discovery knows nothing about until he or she claims.
Wouldn’t this type of information be useful to someone selling life insurance? Or how about in reducing medical aid claims? Do you see where I’m going with this?
2. Cover Integration
So let us ask you a question: “You can see that your client is healthy – That’s because they seldom use the medical aid. They go to gym every day, and they buy lots of healthy foods as well. Would you be willing to give them a discount on their life insurance knowing this?”
Our guess is your reply goes something like this: “Yeah sure, but what about 20 years from now when he’s no longer going to gym, and has a heart problem?” Good question.
So here’s how Vitality membership works:
Your Vitality membership is based on earning points which are referred to as rewards. So you go for your annual health checks, clock in at the gym every day, buy healthy foods, and by so doing, earn yourself rewards.
The more points, or rewards, you earn, the higher your Vitality status:
• Blue status – where everyone starts off and not a good place to stay
• Bronze status – 10, 000 Vitality points
• Silver status – 30, 000 Vitality points
• Gold status – 45, 000 Vitality points
• Diamond status – Must have maintained 3 years at Gold to get here
The higher your Vitality status, the bigger the discounts earned on things like gym, flights, hotel stays, and of course, life insurance.
Getting back to cover integration now…
We can see that Diamond status individuals have tremendous potential as life insurance clients. In fact, getting to Gold status is already a good start.
The Discovery Life product is all based on the ‘Life Fund’ principle. So, for argument’s sake, let’s assume a million Rand is your total Life Fund. You die and the total Life Fund will pay R1 million out to your beneficiaries.
The Total Life Fund is made up of the following:
• Life fund – R714, 285
• Cover integrator of either 0%, 20% or 40% of the life fund mentioned above – R285, 714 at 40%
• Financial integrator of either 0%, 20% or 40% of the same life fund – R0 in our example
• Total Life Fund – R1, 000, 000
Cover integration offers you the opportunity to get up to 40% of your Life Fund at a 50% discount. In our example this would mean R285, 714 of our R1, 000, 000 is at a 50% discount given upfront.
But here’s where things fall flat for many of us…
That’s because we don’t understand how cover integration works. The whole intention of Vitality is to get you to become healthier. The way to do that is by moving you from Blue Status to Diamond Status. If you remain on Blue Status year in and year out, that’s not a sign of someone concerned about their health, which means the amount of discounted cover starts to reduce.
• Stay on Blue Status and your integrated cover reduces by 1.07%. In other words, the 40% integrated cover reduces by this percentage upon anniversary.
• Get to Diamond Status and your integrated cover grows by 1.07%. In other words, your 40% integrated cover grows by 1.07% upon anniversary.
• In order to maintain your integrated cover ‘as is’ you need to reach the Silver Status.
If you have no intention of moving up in status, then life insurance becomes more expensive. That’s because the cover you were given upfront at a 50% discount is now being reduced.
We haven’t even covered the other integration benefits such as Health Integration and DiscoveryCard Integration. That we’ll leave for a later article, but for now realise that everything at Discovery Life revolves around Vitality and your status.
Just signing up for Vitality will automatically qualify you for a huge upfront discount on your life insurance, but in order to grow and keep those discounts you need to improve your Vitality status. To make this whole thing work you need to get to Gold Status.
Sound like your cup of tea?
If you would like a Discovery Life financial advisor to contact you, leave your details below.
Until next time.
The InsuranceFundi Team