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AIA says Vitality is flying as another insurer tries to shoot it down

AIA says its Vitality programme is flying – but one insurer says it goes against what insurance should be for.

Wednesday, August 28th 2019, 8:47PM 17 Comments

AIA says about 40% of customers taking out policies are choosing to add Vitality, a programme that offers premium discounts and other incentives to people who are living healthier lifestyles.

Spokesman Craig Glover said the response was very positive and adviser feedback had been good.

But Naomi Ballantyne, managing director of Partners Life, said she was not planning anything similar.

She said the insurance products Partners dealt with were intended to be there to support people when they stopped being well. A discount that only applied when someone was well was an anathema to that, she said.

“We want to be able to offer an insurance product to all New Zealanders.”

Selecting out “the vast majority” would not be a sensible business decision. “I’d prefer it if we got prices down, down for everyone.”

Customers were already fully underwritten when policies were issued, she said.

She was not worried about the prospect of picking up clients who were not well enough to qualify for Vitality, “as long as we’re pricing for it”.

But Glover said the product was designed to be accessible.

"The AIA Vitality discount applies to any health loadings (eg high BMI loading), which helps to make cover more affordable for customers who initially present with health issues. As customers engage in the programme and improve their health, there is an opportunity for these loadings to be reviewed.

"Many customers can also achieve the Gold status required to retain their AIA Vitality discount without participating in physical activity simply by completing the range of health checks and screens.

"For those customers who are unable to achieve the Gold status, the discount does reduce over time but customers will never pay more for their cover than our standard market offering, which is already highly competitive."

John Harrison, director of Paragon Insurance, said he had offered Vitality to a handful of customers and they had signed up. “It’s getting people to have a look at their health and have a bit of fun around that.”

He said some people could find it confronting to get a Vitality age score that was significantly older than they were, or to be told their BMI was not what it should be.

AIA is rolling out its Vitality programme, which offers premium discounts up to 20% for those who achieve its highest ranking, through exercise, diet and medical checks.

Michael Naylor, a senior lecturer in the school of economics and finance at Massey University, said the programme meant the insurer was getting the pick of insurance clients.

“This enables Vitality to pick clients who self-select themselves as concerned about health, and therefore a lower risk, and therefore Vitality can make profit despite offering lower premiums.

“Companies who do not offer these clients the same, will lose their best clients and be left with the less health-conscious, higher-risk, clients. Therefore they will have to raise premiums, and will lose more at-the-margin clients. These policies are an increasing trend internationally.

“They work best when linked to a telematic device, like a Fitbit, so a client's promise to exercise can be enforced."

Tags: AIA health insurance Naomi Ballantyne Partners Life Vitality

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Comments from our readers

On 30 August 2019 at 8:01 am Skeptical said:
I was speaking to a chap the other night around vitality. He really likes kayak fishing, does it three or four times a week (weather permitting), he works in a bank likes to dress nice and wears a dress watch. Plenty of exercise which can't be recorded and no chance in getting him to wear a fitbit. This will speak to a lot of New Zealanders, I do boxing, my colleague plays touch and finds wearing a watch a nuisance no chance of either of these being recorded. Yes there are rewards on the table, but only if you do specific sets of activities and record them on AIA's terms.

Michael Naylor's point is real, but it doesn't take into consideration this.

I think a loyalty scheme such as vitality is great as it changes the shape of the conversation, but I think we've got some ways to go before it actually is viable for the vast majority of people. This speaks volumes to the take up rate of 40%, considering any policy over approx. $1,000 API is guaranteed a discount in their first year (even after vitality premiums). You'd expect people to take it up at higher rates.

I'd really like an industry authority/commentator to discuss the claim that Vitality is not a financial services product though. It seems that a customer would reasonably expect it to be as it is purchased from a financial services provider and has a direct financial impact (on their premiums).
On 30 August 2019 at 11:16 am Mike Naylor said:
You can get corporate looking activity-enabled watches. Its just that most on sale in NZ are aimed at sports-people.

The deeper point is that over time these enabled watches will be able to record a range of metrics, including blood-components. They'll be a very handy devise to enable clients with conditions to monitor their health and encourage good activities.

Advisers will be able to work with clients and insurers to teach clients to use the feedback to improve their health. Very value-added.

A key component will be the level of trust a client has in their insurer re collecting confidential info. So how do insurers and advisers work to be trustable health data partners?
On 30 August 2019 at 11:47 am JPHale said:
Skeptical there are some quite valid points in there.

And as someone who is considered quite active by my Dr and sufficiently active enough by my cardiologist, my full time wearing of my Fitbit (6-7 years) with the Vitality trial in the last couple of months, I've barely ranked any points for activity.

Busy moving, but not at the gym or in activities that the Fitbit picks up particularly well outside heart rate. I have the feeling for the average Kiwi it will sound like a great idea, but the practical reality, if you're not doing structured exercise at a sufficiently intense level, it's not going to deliver on the promises.

And yes, by all accounts there have been many in the trial that have scored significantly well in the app, with the activity they do, but it's not covering or capturing all of the activity that contributes to wellbeing.

My personal opinion on it not being a financial services product, on its own, if you don't have to buy insurance, it's not. It's an another paid loyalty scheme that gets you moving, which has its positive potential on health.

As a product/service alongside and built into the sale of a financial services product, I struggle to see how it is not included in the financial advice piece, moreover, it also has a medical advice aspect to it too.
On 30 August 2019 at 12:09 pm all hat, no cattle said:
well the recent report into the petrol industry made some interesting comments on loyalty programs' impact on pricing.

@skeptic is Vitality a FS product?
If I buy my broadband through my power company does the price of it fall under the EMI?
On 30 August 2019 at 12:14 pm Tash said:
Michael Naylor says..."Companies who do not offer these clients the same, will lose their best clients..."

Actually they may only lose those clients of advisers who don't know their products.

As far as I am concerned the product benefits are the only important thing at claim time (which is why people pay premiums) - everything else is a gimmick.

All gimmicks come with a cost - if that cost if less than best product/benefits compliance rerquires I have to explain that very carefully to clients so that they can know what the true cost of a free fitbit might be come claim time.
On 30 August 2019 at 1:36 pm Skeptical said:
@JPHale Wise as always. I completely agree with your comments regarding FS status. I find it hard to understand how it's not considered one when sold with insurance. Say if I replace an AIA policy with vitality attached I assume that in my BRA I will have to explain by moving providers that they loose out on this as a benefit. Which seems weird for something that has been explained to me as outside the scope of financial services.

@all hat, no cattle - I'm not an adviser for broadband nor power companies, so I have no idea. That's why I've specifically asked regarding the FS industry rather than something that may or may not be tangentially related with a completely different set of regulations, rules and governing bodies.

@Mike Naylor - thanks for responding. I do think that the advancements you mention would establish superior client selection and quicker underwriting times (therefore creating a healthier book) under a model where the provider has access to the information. The current model is that the data is stored overseas and no one can see it unless they give you access to their phone.
On 30 August 2019 at 1:49 pm Adviser1 said:
The independent research houses are struggling to rate this type of loyalty/wellness scheme as an actual insurance benefit so there's your answer I suggest.
On 30 August 2019 at 3:28 pm Craig Glover said:
@Skeptical I’m an avid kayak fisherman myself (the weather’s looking mint for this weekend btw) and wear my Garmin device when I’m out. It’s waterproof, doesn’t get in the way and also has GPS on it which is handy as a back-up in case my Lowrance fails on me. As well as tracking steps, AIA Vitality also keep track of your heart rate so that I know that when out for a paddle this weekend I may not reach my target step count (though there is a bit of a walk from the car to the beach and back) I will get at least 30mins of exercise averaging more than 60% of my max heart rate (my favourite spot off Mahurangi is a bit of a paddle away) and I will earn fitness points for that.

Also, without this reading like an advert for fitness bands there are a range of styles out there, including dress ones. I have a standard black plastic one but a lot of people on the AIA Vitality programme do tend to take up the 25% discount to get the fitness tracker of their choice.

AIA Vitality’s not a loyalty programme though and there are loads of benefits not just discounts and active reward vouchers. I’ve lost a couple of KGs since being on the programme and that’s only from making small changes to what I’m doing. I take the stairs instead of summoning the lift in the morning and I take a walk around the block most lunch breaks.

We’re seeing really good take-up rates. When I spoke to Good Returns the take up rate was about 40% but since then it’s gone up to 45%. Attachment rates are continuing to track up as advisers get to know the programme and customers hear about it. Given that almost half of our policies are being taken out with AIA Vitality less than a month after launch we’re stoked and we’re happy that our customers are seeing the many benefits of the programme for themselves.
On 30 August 2019 at 6:42 pm Len_Elikhis said:
I became a Vitality convert after I spent time with the Discovery team in South Africa.

The Vitality programme exists in over 18 markets and has been consistently shown to deliver value through improved claims and lapse experience, which is shared with engaged customers through premium discounts.
Sources of this claims improvement arise from health checks, physical activity, and healthy nutrition which the Vitality programme encourages and subsidises.

The costs of the programme are funded through the member fee and partner subsidies, which help to keep the programme sustainable.

Apart from the actuarial evidence, the proliferation of similar programmes across the Vitality markets provides some insight into the success of a combined protection / wellbeing solution.

One only needs to look at the very recent trend of premium increases in the market to understand that the current insurance model needs to evolve.

Thank you everyone for your views - it's great to see the discussion.
On 3 September 2019 at 10:59 am Fair deal said:
Vitality is a global brand that has proven and continues to prove that by rewarding people for being healthy makes sense for insuring for when you do get sick.

The policy payments are still made. But why should a healthy 50 year old pay the same premium as an unhealthy 50 year old - even though we both get the same cover and the unhealthy client still receives his benefits.

There are many ways to assess this - but the most important lies in that it reduces client morbidity, decreases the aging risk pool and makes sustainable sense for any insurer and in turn for any client. It worked for me and my whole family and still continues to work for us all.

And we are all so very different and some not as fit orientated as others. I am a believer as I saw the change it made and continues to make across the whole insurance and banking sector. Google Discovery Holdings Group SA.

The proof is in the pudding they say.
On 3 September 2019 at 2:08 pm Skeptical said:
Thank you Len and Craig for responding, great to have input from the people that are on the ground getting this all set up and running. I'd say attachment rates will increase as people become more familiar with the product. Would either of you two have an official position regarding the FS status of the product?

Correct me if I'm wrong but didn't Discovery in SA and other vitality offerings rise to prominence via the compulsory group space?(rather than the user pays NZ model) I really do think there is huge potential in this area, it would just be great to see alternative versions of 'health' be accepted. Like I mentioned in my first comment I think it is great that a provider is doing something to make the conversation/connection with clients easier. Also as you say Len, constant increases year on year will just eventually to a widening of the underinsurance problem in NZ.

@Fair deal - I would say in reality a healthy 50 year old would never pay the same as the unhealthy one as this is what loadings/exclusions are for. If your sentiment is actually, after having the policy for a number of years why should a person who's willing to improve their health (in a way that can be tracked and monitored) pay the same as someone who doesn't? That's an interesting philosophical point as I don't believe anyone intends to get unhealthy, sure they may make bad choices but I don't anyone is aiming to get diabetes. Further to this, how much running do you think someone who is going through chemotherapy is going to do? Is it the right thing to do ping them on premium because they suffered an event their insurance intended to deal with?
On 3 September 2019 at 4:39 pm Mike Naylor said:
Another point to discuss - you need to think about the current fitbits like 1980's brick phones - useful but just the first version. Imagine a 2025 fitbit - a i-phone. Imagine capacity to assess a full range of body metrics, including areas like balance or foot tread. These are key indicators of looming medical emergencies, so your phone can be alerted to call an ambulance. etc.
AIA is then able to plug into a wide range of customer-friendly value adds, as well as set premiums based on attracted the desired clients.
On 3 September 2019 at 7:21 pm Len_Elikhis said:
@Skeptical, Discovery launched Vitality in 1997 to address rising health insurance costs by improving customer health outcomes. In 1998, the South African government mandated community rating and required all health insurers (retail and group) to accept pre-existing conditions after an initial stand-down period. The Vitality programme with its concept of “shared value” perfectly suited this new context: Discovery was able to select better risks than its competitors and improve the health outcomes of all engaged members.

Regarding your question about the FS status of the programme: AIA Vitality is not a financial product requiring advice. However, we believe that it it is appropriate to discuss the premium discount feature as part of an advice process to ensure complete customer understanding of their insurance cover.
On 4 September 2019 at 9:33 am Tash said:
It is appropriate for advisers to discuss the discount AND the possible opportunity cost of not having another provider's products. Ie what they might miss out on at claim time!

Product benefits are guaranteed is Vitality and it's discounts guaranteed? Perhaps Len can confirm.
On 4 September 2019 at 11:11 am Len_Elikhis said:
@Tash, the premium discount is not guaranteed. We are transparent in all of our customer and Adviser material (as well the article above) that the discount starts at 10% and may increase or decrease annually depending on the member’s Vitality status. Members who engage in the programme can eventually achieve a discount up to 20% and those who do not engage will have their discount gradually reduce to 0%.

I also want to stress that AIA Vitality is not designed to be a discount programme - it is a wellbeing programme that shares in value creation with engaged members.

Regarding your second question - of course, Advisers have a primary responsibility to recommend insurance cover that best meets the customer’s needs. We believe that we offer a competitive insurance proposition that meets the needs of most customers and the AIA Vitality well-being proposition compliments our offering.

Thanks for your question!
On 4 September 2019 at 1:42 pm Tash said:
Thanks Len
What I mean is you could decide to apply NO discount at all on premiums, regardless of Vitality status and contuinue just with other Vitality membership benefits - correct?
On 4 September 2019 at 8:40 pm Len_Elikhis said:
@Tash, the Vitality premium adjustment rules (initial discounts, premium flexing, eligible benefits qualifying for the discount, etc.) are not guaranteed.

In other markets, we have seen the initial Vitality discount and flexing rules change over time as insurers build up their understanding of the programme and respond to the experience.

We have also seen programmes evolve to add new features, partners, rewards, and technologies.

As I mentioned above, Vitality is not a discount programme - it is a wellbeing programme designed to encourage and reward members who improve their health outcomes.

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