While one incentivises truck drivers with airtime and chips, the other gets group cover right
By Stephen Cranston
In Roman times bread and circuses were the instruments to keep the ordinary man in check. The new post-millennial equivalent is burgers and airtime.
Discovery Business Insurance aims to be the truck driver’s friend. It still offers Vida lattes and Kauai smoothies. But to really get into this market it has brought in that health food colossus Wimpy as a partner, plus all four cellphone companies (including Telkom). Let’s hope they don’t use the airtime while they’re driving.
Discovery is taking on some excellent businesses, such as Santam and Hollard, in this space — a far cry from previous competitors such as a badly run medical aid industry.
It is extending many of the themes it has in place in personal lines insurance.
Discovery Insure boss Anton Ossip says the business reward is based on the average Vitality Drive for Business score. Each truck is installed with a DQ-Track device, which gives full access to driving information. Then up to 30% of the cost of insuring the vehicle comes back in rewards, and if they’re lucky the drivers might share a bag of chips too.
To be fair, Discovery’s intrusive approach has reduced road deaths, as 90% of accidents are due to human error. It is the joint responsibility of fleet management and drivers to solve this.
Discovery would love to give the impression that it is the only innovator. But in fact BrightRock, a group of exiles from Discovery, is also in the game. It has just launched a product in the much less glamorous world of group risk (death and disability). As a pension fund trustee I know this is highly commoditised.
But as BrightRock CEO Schalk Malan puts it, the structure is due for an overhaul. Typically it provides a death benefit of four times salary, which is far too little at a younger age to support a family in the event of death and, especially, disabled people for the rest of their lives.
Malan says cover is based on the total value of future pay cheques. It will mean employees older than 55 need to top up their cover to get to previous levels, but BrightRock makes this available (up to double the group cover) at the same wholesale rate as the group cover itself and without medical underwriting. Of course over-55s make for a powerful lobbying group as they include most of senior management, who may not want to change. But companies and their pension funds must look at the greater good.
It is also useful that when employees leave a company BrightRock lets them continue with their cover on the same terms as an individual client.
Like Discovery, BrightRock is at the complex end of the insurance spectrum, but in an age of robo advice and other forms of instant gratification it has a niche among the more sophisticated life intermediaries. It has 4,300 advisers selling its products.
Its largest shareholder, Sanlam, believes it appeals to a different market from the vanilla Sanlam-branded businesses.
And it seems right: it wrote R1.1bn in annualised premium income with 64% year-on-year growth and it covers 1.3-million lives. It has already paid R549m in claims.
One of its best innovations is that while most people have to go through two years of temporary disability before they receive a lump sum payout, BrightRock gives them the choice of a lump sum or an income on the day a disability has been diagnosed. And customers can enjoy a full salary equivalent, not just the standard 75% of pensionable salary.
Malan promises that the cover per premium rand is substantially increased. For a premium that would buy R250m in traditional cover it offers R400m in needs-based cover, with the option to buy up to R712m worth with top-ups.
It was the life industry’s turn to climb the wall of shame. The long-term insurance ombudsman has released its annual report. A passing grade would be when no more than 25% of an insurer’s cases were found wholly or partly in favour of clients. BrightRock got a distinction with just 9.1% of disputes going against it.
The worst offenders were Old Mutual Alternative Risk on 57.2%, Vodacom Life and Smart Life both on 50%, Workers Life (47.6%) and Nestlife Assurance (43.8%). Perhaps these businesses are too small to run in-house complaint-resolution departments and simply outsource this function to the ombudsman’s office. Vodacom Life may be small, but the reputation of the entire Vodacom Group could be threatened if it keeps losing cases.
When it comes to the larger insurers, Sanlam has the best batting average, losing 14.5% of cases, well below the 24.1% for Momentum, 25.4% of Old Mutual and 32.4% for Liberty. These statistics may be crude but they give a good indication of a company’s ability to resolve problems. No business with a poor record can claim to be client-centric.
Deputy ombudsman Jennifer Preiss tells me the main source of complaints (47.7%) is for claims declined as the policy terms or conditions were not recognised or met. Next, with 30.2%, is poor communications, documents or information not supplied, and generally poor service. Claims rejected on the basis of nondisclosure account for barely 5% of the total but for a quarter of all disability-related disputes.
One of the perennial complaints in the past — dissatisfaction with policy performance at maturity or surrender — has fallen to barely 5% of the total. This is partly because the life insurance industry is no longer the custodian of the nation’s savings, a position it has lost over the past 20 years to pension funds and collective investment schemes. And perhaps endowment policies are getting easier to understand.
- This article was first published on page 10 of Business Day on Friday, 18 May 2018.