Shared value and premium sustainability: meeting the challenges of a long, healthy life

Discovery’s insurance model has shown to be effective in accelerating the ageing transition among its client base

27 August 2020 - 10:20 By Gareth Friedlander
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Discovery’s Shared-value insurance model has shown to be effective in accelerating the ageing transition among its client base.
Discovery’s Shared-value insurance model has shown to be effective in accelerating the ageing transition among its client base.
Image: Supplied/Discovery/Getty Images

We all know that we need to plan for our retirement, both financially and by keeping healthy. We all wish to transition into that joyous time of life seamlessly and enjoy the freedom of time and pleasure that we have earned.

Yet while the concept of retirement has remained roughly the same for generations — “that new life after work” — what that means for those of us working today is quickly evolving.

“All societies in the world are in the middle of a longevity revolution — some are at its early stages and some are more advanced,” according to the UN’s report on World Population Ageing, “ ... but all will pass through this extraordinary transition”.

The ageing transition, according to the UN, is described by the likelihood of individuals within a society living past the age of 65. As societies develop, this likelihood rises from less than 50% — as was the case in Sweden in the 1980s — to more than 90%, as we’ve seen in countries with the highest life expectancy.

SA has a relatively young population by UN statistics. Only 5.4% of South Africans were aged over 65 in 2019, as compared with a global average of 9.1%. Yet this figure is expected to rise to 6.7% by 2030 and is already higher compared with the rest of Africa, where an average of 3.5% of the people alive in 2019 were aged 65 years or older.

The age of 65 is what most societies have determined as retirement age. Not only are more people likely to reach retirement age, but they are increasingly likely to live ever further beyond it.

“People used to work right up until the last day of their lives,” says Gareth Friedlander, deputy CEO of Discovery Life. “This meant that people would enter retirement at around the same age of the average life expectancy. Now, people spend almost half their adult lifetime working, and the rest in retirement.”

 ... only 6% of South Africans said to be financially prepared for retirement ...

Discovery’s Shared-value insurance model, which rewards consumers for adopting healthier lifestyle habits through its Vitality programme, has been shown to be effective in accelerating the ageing transition among its client base.

Discovery Vitality Gold and Diamond members, on average, live to the ripe old age of 87, which is well above the SA average of 63.5, and among the highest life expectancies in the world. These members are 15 times more likely to live past 100 years.

“This is obviously fantastic news for the client, and it means that we need to continuously enhance our Shared-value offering to cater for their evolving needs,” says Friedlander.

“People need to plan financially for a longer retirement by adopting healthy and sustainable savings habits, such as saving more, for longer, while drawing down less in retirement,” says Friedlander.

“This is something the team at Discovery Invest are seeking to address by deploying our Shared-value model to encourage appropriate saving behaviours for a financially free retirement.”

With only 6% of South Africans said to be financially prepared for retirement, this is no small feat.  

Health-related expenditure in retirement is more than three times as much as that of working households. Those 65 years of age and older, meanwhile, are more price-sensitive when it comes to protecting themselves against rising health costs through important and appropriate insurance.

“While increased life expectancy allows individuals to enjoy life for longer, they still face significant insurance risk in retirement,” says Friedlander. “Policyholders may struggle to afford policy premiums at a time when it could be argued that they need their cover the most.”

“Accordingly, the team at Discovery Life has refocused its Shared-value insurance mechanism for clients, through the Vitality Premium Leveller and Longevity Vitality rating benefits.”

“Our data has shown that clients who engage with Vitality when they are younger build up a base level of health through long-term health and wellness management. Combining this with a Vitality Health Check in retirement, we are able to unlock further savings which can result in a reduction of premiums of up to 46%,” says Friedlander.

“This helps ensure that our clients remain comprehensively covered for their retirement period, feeling safe in the knowledge that their insurance plan is designed to see them through this chapter of their lives — protecting their interests and encouraging good health and wellbeing.”

This article was paid for by Discovery Life.