Discovery Ltd. is an innovative insurance company that was founded over 20 years ago. Today, its core purpose – making people healthier and enhancing and protecting their lives – is central to its shared-value business model.
When Discovery was founded in 1992, the complexity of the South African healthcare environment at the time provided a powerful incubator for innovation. South Africa’s high disease burden, an undersupply of doctors, and the vision of changing the way healthcare works required a new framework for addressing healthcare challenges. Health promotion and chronic disease prevention, as opposed to healthcare during illness, offered such a framework.
Incentivizing Behavior Change to Bring Down Insurance Costs
As reflected in its business model, Discovery’s focus has always been on placing the needs of society at the core of its strategy. Discovery designs its innovative insurance products around its shared-value approach, which manifests in its health-promoting integrated insurance programme, Vitality. These products use behavioral economics to translate positive behavior into immediate rewards, which in turn inspire long-term positive behavior change. Changed behavior results in lower insurance costs, and the savings are used to fund incentives that encourage the positive change in behavior. Members benefit from better health, increased insurance value and financial rewards; the insurer benefits from lower costs, and customer loyalty and retention.
Expanding Business Model
Discovery’s shared-value insurance model has become even more relevant in the context of the growing importance of the societal trends shaping the insurance industry. Shared-value health, protection and savings products that are dynamic in nature, offer people the opportunity to manage their evolving health needs throughout their lives and be rewarded for improvement. This will become increasingly important as populations age. For example, as the latest WHO report on aging has highlighted, effective health promotion programs that reduce the risks in older people for cognitive and mobility-related functional impairments save costs for individuals, families and society, as they allow people to live their lives to the fullest. On this chassis, Discovery can grow the business further in existing sectors and expand into new territories in adjacent sectors. The financial and societal success of the Vitality model has led to shared-value insurance becoming a compelling proposition for other insurers. Discovery recently established the Global Vitality Network, comprising partner insurers that employ the Vitality business model and participate in collective network assets such as global rewards partnerships, technology collaborations, and academic and media partnerships. Over the past five years, Discovery has partnered with AIA in Asia and Australia, Generali in Europe, John Hancock in the United States, Manulife in Canada, and Ping An Health in China – all of whom have evolved into ambassadors and proponents of shared-value insurance.
Targeting New Territory to Inspire Positive Change
By applying the same shared-value model, Discovery aims to expand into adjacent industries. Our evidence-based insights about many peoples’ inherent short-termism and seemingly “irrational” behavior has implications well beyond health insurance and applies, for example, to motor vehicle insurance. Discovery’s vehicle insurance business uses technology to track and measure clients’ driving behavior. The rewards programme incentivizes clients to improve their driving behavior and lower their risk.
Current available results validate the relevance of the shared-value approach in this area too: Driving behavior improves significantly, leading to fewer claims and lower claims costs for the insurer, and immediate and long-term benefits for clients in the form of financial rewards and savings, as well as increased safety on the roads. Considering the “irrationality” people generally display in their savings behavior, an opportunity exists to disrupt traditional business models in Discovery’s next targeted adjacency, the banking industry, through a shared-value model.
With this global expansion and because Discovery leverages personalized technologies to enable Vitality members to monitor their health and driving behaviors, the privacy and confidentiality implications from collecting large amounts of data are significant. To address this, Vitality has released a set of guiding principles for the responsible innovation of personalised technologies and the appropriate stewardship of data from these devices.
In August 2015, Discovery ranked 17th on Fortune’s first Change the World List, which recognizes organisations that have made significant progress in addressing major social problems as part of their core business strategy. This recognition for and impact of our model propels Discovery to continue to work towards and beyond our 2018 ambition of being the best insurance organization in the world and a powerful force for social good.
Gugu McLaren is Senior Sustainability Specialist at Discovery Limited. She has 10 years’ experience in driving the development and delivery of sustainability strategic frameworks and projects.