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Discovery strides into the UK life assurance industry

16 March 2007 Gareth Stokes

Discovery Holdings has taken another step towards expanding its unique consumer-engaged model in the UK. PruLife, a new joint venture between Discovery and Prudential plc, was introduced by Discovery chief executive, Adrian Gore, at a media briefing held

PruLife will be launched a little more than two years after Discovery entered the UK health insurance market through a similar joint venture with Prudential. PruHealth has already grown to a staggering 110, 000 lives over that period. To facilitate the new venture a holding structure known as PruProtection has been formed. This structure is held equally by Discovery and Prudential and will house 100% of PruHealth and PruLife. Discovery in South Africa will handle the back office functions of the operation.

The life product that will be sold in the UK has already been tested in a pilot scheme. Industry response has been excellent and the product will now be rolled out under the PruProtection banner, subject to FSA approval in the UK and Reserve Bank approval in South Africa.

Finding a competitive edge

The life assurance industry in the UK is characterised by low competitiveness. As example, Gore sited a like-for-like quote comparison of thirteen different life assurance providers. The price and product similarities apparent in this comparison suggest that the market is ready for a new and innovative life assurance offering. Enter Discovery and Prudential, who are set to challenge the status quo as they attempt to integrate health insurance and wellness with life insurance.

Gore believes that given the current state of the UK life assurance market, PruLife will be able to offer a suitably differentiated product from day one. He believes that competitors in the assurance industry will be quicker to adapt than those in the medical insurance industry but remains confident that Discovery's product innovation and Prudentials leading insurance profile would be up to any competitor challenges.

The Prudential brand is well established in the UK and offers a perfect vehicle for accessing the UK market. The company's brand credibility comes out tops in numerous polls in the financial service industry.

Discovery and Prudential are joined in this venture by one of the worlds largest re-insurers, Hannover Re. The partnership will alleviate some of the capital burden in establishing the new business. Discovery expects to invest R1 billion in the business over the next five years. This commitment is linked to the success of the venture and will be funded out of Discoverys existing and internally generated cash reserves.

Tapping in to a huge market

The UK protection market is at least 3.5 times larger than the South African market. PruLife will enter the fray to secure a share of the R11 billion per annum of new business premium up for grabs.

When Discovery entered the UK health insurance market, consumers were stuck for choice where pricing and benefits were concerned. "The market [for assurance] is very similar in this way to the PMI market we encountered in the UK before PruHealth was launched in 2004," said Gore.

UK consumers can expect a number of innovative strategies from the new PruLife venture. These include concepts already available through Discovery Life in South Africa, such as up-front premium reductions for recognition of future health management and medium term incentives with paybacks. PruProtection will create the perfect platform to expand the wellness programme and its related benefits to PruHealth and PruLife clients in the UK

Gore believes this strategy will continue to deliver: "Our experience reveals better loss ratios, lapse rates and benefits take up, as well as improvements in disability and morbidity, all oft his while giving cheaper cover to consumers."

Editor's thoughts:
PruHealth has grown from infancy to 110, 000 members in the space of two short years. Given the more competitive nature of the UK life assurance industry, do you think Discoverys new joint venture, PruLife, will have similar successes? Send your comments to
gareth@fanews.co.za.

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