Business life cover that incentivises those insured to lead healthy lifestyles

Discovery Life - Business Life Plan

Business life cover that incentivises those insured to lead healthy lifestyles

13 August 2014

Business life assurance is an important consideration in managing a business, but it can often be overlooked. Business owners do not see any direct benefits from it while a policy is in force, and its significance only becomes evident on a life-changing event. In cases of death or disability, it allows business partners to buy the interests of another (known as buy and sell cover) or it offers traditional keyperson insurance which pays out on death or disability of selected key staff members.

However, Discovery Life’s new Business Life Plan does not simply pay out in the event of a business owner or key employee suffering a life-changing event. “It goes beyond being a conventional product and incentivises and rewards the good health of business owners and insured staff members with more wealth while they are still ably running the business” says Discovery Life’s Deputy CEO, Kenny Rabson.

Rabson points to the limitations of traditional business life products that are solely focused on providing financial support at the time of a claim. “With no innovation over time, these old style products have become heavily commoditized, and purchase decisions are largely based on who offers the lowest premium. There has been no differentiation in this market.”

The Discovery Life Business Life Plan distinguishes itself by offering financial rewards to the life assured during the policy duration, and motivates them to look after their health. It is no longer a case of paying out cover in the event of death or disability, as its innovative features reward both the life assured and the owner of the policy throughout its duration.

“One of the flaws in this market segment is that the life assured has not been encouraged to manage and improve their own health” explains Rabson. “In most cases, the life assured is not the same as the policyholder, being the person or company paying the premium. So with no link between the person covered and the person or entity bearing the premium cost, there has been no motivation for the life assured to reduce their health risks. And even where there were products rewarding health management of the life assured, the financial benefits would probably flow to the policyholder and not directly to the life assured.”

The Business Life Plan offering includes a Principal Payback Fund feature which directly rewards the life assured of a buy-and-sell policy for following a healthy lifestyle. On inception of the policy, the Principal PayBack Fund is expressed as a multiple (being either 200 or 300 times), of the initial monthly life cover premium.  This upfront fund then increases each year, based on a selected annual benefit increase, as well as a factor based on the health of the life assured.  Vitality and Discovery Health (where applicable) data is used to assess how the life assured is managing their health and what steps are taken to ensure a healthy lifestyle. As the Vitality status and health of the life assured improve, so do the benefits payable through the Principal Payback Fund.

The Principal Payback Fund then pays out an increasing percentage of its accumulated value every five years to the life assured, with the remainder of the fund being paid out by year 25. “It is important to note that the regular Principal Payback Fund distributions are made to the life assured, not to the policyholder on a buy-and-sell policy” says Rabson.

“There is a clear incentive for the life assured to optimise their health. A healthy person has lower mortality risk, and should be rewarded. The real power of the Principal PayBack Fund is that it allows those insured to see how much their future health is worth today, as well as being able to continuously see the impact of how their current behaviours will affect their future health, and in turn their wealth.”

Rabson says that the unique structure of the Business Life Plan, which integrates life cover with health management, has wide-reaching benefits. “This mindset will undoubtedly affect other employees and lead to a more productive management structure as well as workforce, which in turns results in improved profits and a more valuable business over the long term. Not only does the life assured benefit, but so do the policyholder, the overall business, and Discovery Life. We see shared value being created for all stakeholders.”

ENDS