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Elsewhere we write about gamification (using game design techniques to obtain and maintain customer engagement). The proposition offered by Vitality Life and Vitality Health in the UK is owned by South Africa’s Discovery Life. Recently rebranded from PruProtect and PruHealth, these firms replicate their parent company’s innovative approach to product design and customer engagement whilst also collecting a lot of useful data about customers. Vitality market individual life, critical illness, disability income and health insurance products.

Critical illness has been a feature of many markets worldwide, and the well established principle is the payment of a lump sum on diagnosis of one of the covered conditions. A more recent innovation has been the introduction of plans that cover a larger list of conditions but pay out an amount based on the severity of a condition. An added advantage is that cover will continue after payment in respect of a minor condition.

At the time of writing Vitality’s Serious Illness plan covers 166 different illnesses from the mainstream heart attack and cancer to less commonly covered conditions such as giant cell arteritis, encephalitis, Cushing’s disease and Wegener’s granulomatosis.

With price often being the primary consideration in an intermediary’s mind for choosing an insurer, this approach of combining full payment and partial payment for different illnesses adds an interesting dimension in that it makes comparison on price alone more difficult.

But it is relatively easy to compete by adding more and more conditions to the list of those that you cover. So does Vitality have a differentiator?

Vitality is currently the only company in the UK that rewards its customers adopting and maintaining a healthy lifestyle after the initial purchase. Customers can obtain premium discounts, cashback and other benefits by regular gym visits, using heart rate monitors and pedometers, having vaccinations or by attending health screens.

For example:

Activity Points per event Maximum activity frequency
On-line health review 100 1 per year
Gym session 10 per workout 10 per day
Blood pressure measurement 60 per measurement 1 per year
Blood pressure (green zone) 60 if the reading is 120/80 or better 1 per year
Cholesterol measurement 1 per year
Cholesterol (green zone) 60 if the reading is <5 mmol/l 1 per year
Dental check up 1 per year
Pap smear or prostate screen 150 1 per year

This has a number of benefits. First, the company is maintaining customer engagement; many life insurers simply don’t engage with their policyholders from one year to the next. Or in some cases from policy issue to the time a claim is made. Many policyholders forget why they bought the cover in the first place and lapse long before the end date – a costly exercise for the insurer. But one would think Vitality’s customers would have a lower lapse rate as a result of being in regular contact with the company through participation in the Vitality programme.

The points contribute to the customer’s Vitality status – Bronze, Silver, Gold or Platinum – and this gives a premium discount which is kept until the end of the plan. And at the end of each year the status is reviewed and further discounts can be earned.

A next step might be to develop personal monitoring further along similar lines to the telematics used by motor insurers. This is the path John Hancock appears to be following in the US with the recent launch of its own version of the Vitality programme in which policyholders get a free Fitbit to track their progress.

But while reduced lapses may be a boost to the bottom line there could be a bigger prize from this novel approach: data. Many insurers are talking about the need for collecting data, analysing it and then using it to cross-sell, up-sell and introduce different underwriting algorithms and more personalized pricing.

For insurers who have both life and P&C operations the ability to link data across long-term and short-term products for the same customer may be beneficial – provided that is not hindered by legacy systems and silo mentalities. Life insurers without access to these convenient sources will have to find others.