Dis-Chem wants to out-Vitality Discovery with life insurance

With its extraRewards programme ‘effectively’ able to cover the cost of a premium.

Dis-Chem will launch life insurance in the first quarter of next year, a move which it believes will significantly disrupt the broader market.

Discovery Life, which relies on the Vitality shared value model to offer premium discounts and cash back based on healthy behaviour, has 27.3% market share. This is substantially higher than large competitors. This would place it squarely in the crosshairs of Dis-Chem’s offering.

ADVERTISEMENT CONTINUE READING BELOW Read: Dis-Chem’s earnings dip amid revenue growth and life insurance investment [May 2024] Dis-Chem sees double-digit earnings and dividend growth [Oct 2024]

The pharmacy group believes it has a deep understanding of so-called “health consumption risks”. This is especially important for chronic patients who are typically forced to pay higher premiums because of their condition(s).

Because of the fact that it has an understanding of whether or not its customers are following their prescriptions and taking their chronic medication, it believes it is able to use this data to cut premiums considerably.

Dis-Chem is bullish that no other insurance provider can have as deep an understanding of its customers as it does.

Discovery doubles down

This comes as Discovery Health doubles down on personalisation, underpinned by machine learning and artificial intelligence, to get individual members to take customised actions to improve their health and lifespan.

Read: Discovery’s ‘Dollar Life’ premium volumes double in five years [Jul 2024]

It has already tested this with select members, and all 2.2 million adult members on the Discovery Health Medical Scheme will get access to Personal Health Pathways in January.

This will be integrated into the group’s Vitality behavioural rewards programme, which will reward members with Discovery Miles or instant rewards or gameboard plays (or life paybacks for life policyholders).

There could also be additional benefits added to its new Personal Health Fund, which offers members up to R10 000 in “risk-funded benefits for day-to-day expenses each year”.

Dis-Chem’s plan

To counter Vitality, Dis-Chem has launched the extraRewards programme for its Dis-Chem Health and Kaelo policyholders. This offers customers an instant 20% discount on a basket of healthy products and essentials with a cap of R600 in discounts a month. It says this could effectively cover the cost of a premium.

Already, extraRewards is boosting shopping frequency and sales of participating brands on which the discounts are offered. Among engaged members, the former has increased by five visits a year, while spend on the latter is up 67%.

Dis-Chem says engagement like this is “driving improved policy retention”. It says policy sales across its retail channels have doubled year-on-year, albeit off a low base.

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Dis-Chem contends its cost of acquiring a policyholder is roughly two-thirds lower than the rest of the market.

It says the evolution of extraRewards into 2025, when it launches life insurance, will “drive policyholder/shopper behaviour change and engagement”. Key will be just how much it is able to effectively reduce premiums for clients by using the data it has.

Read: How Dis-Chem is taking the fight to Clicks

While it might not have detailed insight into adherence among its chronic base, Discovery has a raft of data on its members: 26.5 million life-years of Vitality engagement data, 48.7 million life-years of health-related utilisation and clinical data, and 11.7 million life-years of condition data and additional data sources. Dis-Chem simply doesn’t have this.

To date, Dis-Chem has launched medical insurance, gap cover and accident cover products together with Kaelo. It acquired a 25% stake in the healthcare provider in 2021 for R200 million.

It will launch the life insurance business using OneSpark, a financial services provider in which it bought a 50% stake in August. It paid R156 million for the investment.

OneSpark doesn’t hold an insurance licence itself – its products, spanning funeral cover and life insurance, are underwritten by Guardrisk Life Limited. Its selling point on its website is that it offers insurance for as little as R30 per month. As part of its life insurance products, OneSpark offers life cover, disability cover, temporary income protection and illness cover.

Expect similar aggressive pricing from Dis-Chem in early 2025 when it launches close to 10 products.

The only problem? The insurance market in South Africa, particularly when it comes to life, is awfully saturated.

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