Enough critical mass to shake up the short-term insurance world!

Gareth Stokes, FAnews Online Editor

A couple of days ago we attended the launch of the Ombudsman for Short-term Insurance (OSTI) 2010 Annual Report. Over lunch we got to chatting with a number of insurance company executives... And it wasn’t long before the conversation turned to the new en

But we’re getting ahead of ourselves. Our friendly lunch-time banter centred on whether there was room for another major player in the domestic short-term insurance landscape. Underwriting margins have only just recovered after a couple of disappointing years, and the consensus was there’s only so much business to go around. New entrants will have to ‘win over’ clients from existing insurers with the inevitable impact on cost efficiencies and profit. It might sound like sour grapes, but the smaller players have a point. A company with Discovery’s clout is going to displace many marginal businesses from their place at the short-term personal lines feeding trough!

The telematics consumers really want!

Discovery couldn’t have timed their entrance to the short-term market better. At a time when many insurers are struggling to reinvent themselves Discovery Insure is entering the race with all cylinders firing. While its competitors are trying to reverse-engineer vehicle telematics into their existing products, Discovery has built the technology into its product from day one. And while other insurers are wondering how to retain clients, Discovery simply adopted the formula applied so successfully in its Discovery Health business – Vitality. Let’s take a quick look at what they’re offering – and what sets their offer apart!

At the foundation level we’re talking ‘nuts and bolts’ personal lines insurance... Discovery Insure will offer fully comprehensive motor vehicle insurance as well as household contents cover and homeowners insurance. The differentiating factor is an incentive-based driver program called Vitality Drive™, which will encourage and promote safe driving. “We are confident that with Discovery Insure we will encourage consumers to change their behaviour and reap rewards for it,” says Gore. It is similar to the Vitality incentive currently linked to the group’s life and healthcare businesses, with one exception. Instead of qualifying for incentives based on his/her Vitality health status, the insured will have to accumulate Driver Quotient ™ (DQ) Points to climb the Vitality Drive ™ status ladder. The better your status, the greater the benefits you receive. (We’re not going to go into too much detail about the benefits in today’s article…) DQ Points can be earned in one of three ways – by taking your vehicle for a multi-point ‘safety’ check, by completing a series of driver safety questions online, and by driving well. And that’s where things get interesting.

Discovery has succeeded where the rest of the short-term crowd has failed by integrating telematics into their insurance product offering. They’ve created a DQ Track ™ telematics device to measure the insured’s driving style. The system tracks vehicle position and provides real time feedback on speed and acceleration, braking and cornering forces! Detailed feedback will be provided to the insured to enable him/her to make ongoing improvements. The media assembled for the product launch were profoundly impressed by the development work that went into the product. Discovery Insure secured the services of automotive engineer Rory Byrne to apply his expertise in motor vehicle dynamics to the methodology behind the Driver Quotient ™. And the formula to determine ‘safe’ driving is based on more than 100,000 hours of actual data!

Throwing down the gauntlet to competitors

Existing insurers who dismiss Discovery Insure as a cocky newcomer are making a serious mistake. The company has huge reach through its existing operations and unless other insurers up their product offering they could soon bleed clients to the financial services giant. Apart from the services already mentioned Discovery Insure offers a range of features not always offered by other insurers… They’ve thrown down the gauntlet by offering the following with their comprehensive motor insurance:

1. Car hire at no additional cost
2. No blame, no excess – the excess is waived on theft, hijacking, hail, storm or fire
3. Roadside assistance

The DQ Track ™ device will be put to good use too. Drivers who activate the service will have access to nationwide stolen vehicle tracking and recovery at no extra cost! The device will also provide real-time emergency support in the event of a motor vehicle accident. Discovery Health’s emergency services will be on standby and alerted in the event the telematics indicate a serious accident. Premium for personal lines cover will be based on usual underwriting principles, while the Vitality Drive ™ is activated at a cost of R49 per month.

Discovery will market the insurance product through its extensive independent intermediary and tied agent force and will pay broker commission in line with industry standards. The group says their comprehensive insurance premiums have been extensively ‘tested’ and will compare favourably with competitors in the short-term space.

Editor’s thoughts: If the success of Discovery’s health and life businesses are anything to go by we’d say the group offers the right mix of ‘bells and whistles’ to keep South Africans happy. Based on your experience with Discovery Health, Discovery Life and Discovery Invest – will you be offering Discovery Insure to your clients? Please add your comment below, or send it to gareth@fanews.co.za