Partners Life criticises Vitality

Managing director Naomi Ballantyne has fronted a new podcast for advisers, in which she expands on comments made to Good Returns about the Vitality programme, through which people can achieve premium discounts by exhibiting good health and wellness.

She said, while it seemed logical that health and wellness should go “hand in hand” with something like life insurance, “I’m not sure that the answer to the question is that simple”.

She said Partners Life believed it was there to support people when they stopped being well – and benefits that were only available to people in good health were an anathema to that.

“We don’t want to select out any group of customers on the basis of their existing health.”

She said each client would be fully underwritten with the lowest possible premium for the greatest amount of coverage and they should be able to lock that in for the life of their contract.

“Encouraging New Zealanders to take their health seriously by being proactive is a wonderful objective … but not all New Zealanders can proactively manage their health to prevent things happening. We do’t think they should miss out on rewards based on things they don’t have control over.

“We don’t think it’s appropriate that the premium payable by the client should be contingent on their ongoing wellness behaviour as a proxy for health long after the underwriting was completed.”

She said one of the key protections of life insurance was that once cover was issued, an insurer could not adjust pricing specifically for the individual in response to their health changes.

Ballantyne said she did not think inducements of this nature had a part in the provision of life insurance.

If someone’s discounts reduced due to a worsening of their health, that was the same as adding premium during the life of a policy she said. That could be a shock, especially for clients who chose the policy for the discount.

She said people who had to cancel a policy for affordability reasons as their health was deteriorating could be vulnerable and the advice process that led them there could be put under scrutiny.

If pricing could increase due to the removal of a non-guaranteed wellness discount after a claim because it affected a wellness score, a regulator might see that as punishment for a claim, she said.

“Can reliance on non-guaranteed discounts as part of an advice recommendation be fully defended, with certainty, in future if the value of those discounts reduce?

“Could any inducement outside of the financial product being advised on, which is not guaranteed for the lifetime of the financial product, but which is only available if a particular financial product is purchased, be viewed as potential conflict?”

She said if there was a fee for the “uncertain” discount that trade-off would be difficult to assess with certainty.

Len Elikhis, AIA NZ chief product and Vitality officer said: “AIA Vitality is a health and wellbeing programme that exists in over 18 markets and has been consistently shown to deliver value through improved claims, which is shared with customers through premium discounts. Sources of this claim health improvements arise from health checks, physical activity, and healthy nutrition that the Vitality programme encourages. Customers will never pay more than for their cover than our standard market offering. The AIA Vitality discount applies to any health loading (eg high BMI) which for those that initially present health issues it will help to make cover more affordable.”

Comments from our readers

On 19 December 2019 at 7:19 am JPHale said:

I’m all for increasing the affordabilty of cover all the way through. As an adviser there is a balance on cover now vs affordability later, which is why many clients opt for the yearly renewable approach rather than the level term premiums.

Products like vitality have a place, but I share Naomi’s concerns that declining health increasing premiums faster at a time when a client needs the cover the most is a real concern. The point of insurance is to have it when you need it.

Tools like vitality that increase premium when clients health behaviours wain have the potential to drive premium pressure when clients least need it.

Illness resulting in disability and trauma claims take a long time to develop, the loss of vitality discounts is an indicator that medical stuff needs looking at, and could be a useful indicator. At the same time most people ignore anything medical until they can’t. And this is usually after the premium pressure and the loss of benefits has happened.

As advisers anyone missing premiums after holding cover for a long time, or are coming to you about reducing cover, we need to have that needs analysis conversation again, not to sell more product, but to discover the possible claim that may be developing.

We’re pretty good on the sales bit, not so great on the discover claim bit. I’ve experienced too many claim situations 3-4 months after cover reduction in my BDM career to ignore this as a significant issue with clients reducing cover.

As too we should be very careful about products that increase premium in surprising ways as clients approach claim time.

On 19 December 2019 at 9:52 am Tash said:

There is no proverbial free lunch!

Clients pay for 'sales traps', like discounts and premium free periods, airpoints and Flybuys, either through increased underlying premiums or reduced claim benefits.

As an 'independent' adviser, clients appoint us to look after their risk, not get them gimmicks. Getting the best deal for the client in my view is about ensuring the client gets the benefit they need when they need it. If all products and providers offerred the same claim solution then 'sales traps' and price would be the only differentiating feature (and no reason for 'independent' advisers to exist). But this is not the case. Product provider selection, if gotten wrong, can cost the client hundreds of thousands of dollars difference at claim time.

'Sale traps' have no place in something as important as financial advice in my view and should never be indulged unless and until there is a full understanding by the client of the possible cost to the client, in particular the possible lost claim opportunities.

On 19 December 2019 at 4:11 pm Ron Flood said:

I stand to be corrected, but my understanding of the Vitality programme is this.
An AIA policy owner is offered the opportunity to subscribe to Vitality for an annual fee. This company is totally independent from AIA and the only information AIA receives is the members status.
AIA offers premium discounts once certain levals are achieved.
If a policyholder loses their discount their premium reverts to the 'shelf price', the standard price charged to everyone.
In summary, good health=discount, deteriating health=standard rates(on existing cover).

Next minute we will have everyone attacking Accuro (Normal BNI discount) or Southern Cross (Healthy living discount).

On 19 December 2019 at 6:26 pm Len_Elikhis said:

Ron Flood, that’s correct - participating in the programme is optional and customers will never pay more than the standard insurance offering without Vitality attachment. The programme has been shown to improve health outcomes for engaged customers in various markets across the world by promoting and reducing barriers to physical activity, sensible diet, and screening.

The level of interest in the programme has been fantastic and we welcome the discussion.

On 20 December 2019 at 9:24 am Skeptical said:

Hey Ron, I would agree with you - but no-one has paid RRP at Briscoes. When everything is discounted for everyone, it is not a discount, it is the set price.

Perfect example of this, is Quotemonster is including the 10% discount in its comparative quotes by default (I imagine this was done by lobby as opposed to QM defaulting to this by themselves). Which shows that the intention is to attract clients with the discount, which in a situation where you have a healthy person it doesn't too problematic as they can maintain that discount.

My question is similar to Naomi's but more of a specific example. Humour me with this, what if someone due to their situation only took out life and health cover, then through participating in the system ran along the beach every morning maintaining their discount. Eventually through doing this & increased exposure to sunlight suffered a melanoma on their leg that went undetected for a while, metastasized and the best course of action was to amputate the leg to stop the spread. Client, a loyal member of vitality and AIA now unable to reach their steps/health goals for the year faces annual increases in premiums as they struggle to recover. Is it fair to now charge this client *higher premiums* as they've suffered something completely out their control - isn't insurance supposed to protect people when something out of their control happens, not punish them?

*I say higher premiums as they would have been sold AIA & the vitality program on the basis of reduction in premium and as per my first point if everything is discounted, it is not a discount.

On 20 December 2019 at 9:27 am JPHale said:

Correct Ron.

The difference is other providers offer loyalty discount programs that reduce premium over time, that doesn't go away at the most expensive part of the contract.

The vitality program rewards good health until you don't have it. And while you have good health you are less likely to claim.

The kicker is the increase in increasing premiums towards the end of the contract when health is conspiring against the person, compounded by the resulting impact on their earnings and ability to pay premiums. It creates a situation of people letting go of cover just when they really need it, helpful to the insurer, not so helpful for the person insured.

Vitality overseas has not been around long enough to bear out this impact yet, so there isn't the hard data on it. But we do know what client behaviour is like and what happens as people approach serious medical issues in life, so what I have outlined is not so fanciful.

For the fit active healthy people out there, vitality has a place in keeping premiums lower now and for the bulk of their contract term, and as a result, the product attracts healthier lives. A great strategy for AIA in this regard, they should have a better claim outcome, from the perspective of not having as many claims from vitality policyholders.

Awesome, attracted healthier lives and haven't taken on as many unhealthy lives. Or more specifically selected against the unhealthy lives.

As a business strategy, well done AIA.

As an advice strategy one that advisers do need to think carefully about if they are genuinely thinking about the claims people will have. Exercise and healthy living help, no doubt about that, as too many people do all of this and still have crappy health outcomes.

On 20 December 2019 at 2:22 pm Azul_Blue said:

Wow, really?

I'm blown away by the resistance towards something that is genuinely there to improve the health of the client/customer. The Vitality offering is not for everyone but those who are health-focused, or want to be health-focused, it's is an absolute no brainer. Vitality is true, tried, and tested with millions of users from all over the world – it can hardly be labeled as a gimmick.

We mention Vitality it all our clients, current and new, but always emphasise the number one priority is comprehensive and relevant insurance protection. This means AIA is not the right fit for them, which of course means, Vitality would not be available.

As we say to all our clients, the best insurance policy is a healthy body and mind – we’ve partnered with the likes of BePure and give away gym passes on a regular basis, and our clients love it.

Kudos to AIA for making Vitality this available to their customers and disrupting the industry. If your competition is speaking out against it, you must be doing something right.

On 20 December 2019 at 4:17 pm Len_Elikhis said:

@Skeptical - your example is oddly specific but I'd like to address it.

Firstly, AIA offers highly competitive products and pricing. Advisers don't need to rely on Vitality to sell our insurance products - instead, the programme provides an opportunity for customers to further reduce their premiums and access a range of other health and lifestyle rewards, including subsidised skin checks from MoleMap.

Secondly, the idea that Vitality is a "gimmick" or adds to the cost of insurance is patent nonsense. Many insurers across the world have embraced Vitality (or have attempted to replicate it) because it has been shown to improve health outcomes and customer engagement. A reduction in claims and improvement in persistency are sources of value and this value is shared with customers by way of premium discounts. And the costs of running the programme are transparently disclosed to customers by way of the Vitality member fee.

Therefore, I suggest that a more realistic example is this:

A customer purchases an insurance policy from AIA because it meets his needs and is competitively priced. The customer decides to attach Vitality because he enjoys staying fit and sees value in the programme. As he engages in the programme, he visits MoleMap for a discounted consultation. The screening checks picks up an early melanoma, which he has removed the same week. He deepens his discount and lives a healthier, longer, better life.

On 6 January 2020 at 11:17 am Tash said:

Continuing Len's example... the client has the early melanoma removed then calls his insurance adviser who tells him the early melanoma will pay 10% of his $200,000 Progressive Care trauma policy.

He finds this extremely disappointing since his friend, who had a similar early melanoma removed, got paid $50,000 (25% of their trauma cover) with a competitor insurer.
His next call is to his lawyer/DRS because his adviser did not explain this potential claims disparity.

(The adviser could have recommended Critical Conditions trauma cover but this requires the client also to take, at additional premium, the Optional Early Stage Cancer Upgrade benefit so even with the vitality discount, premiums may not be much different from what his friend is paying for his trauma cover.)

My point is this. What conduct is expected from advisers around these things?
From an advice perspective, product benefits and features differ between providers, sometimes significantly, and are the only things that will matter at claim time.

I suspect advisers must know their products well enough to cut through any marketing clutter AND explain potential downsides and the costs (not only in price to be paid, but also in possible lost benefits at claim time), of loyalty schemes, discounts or health programmes.

IMHO Vitality is not a reason to recommend an insurance product unless there is no other product that can do better at claim time or those differences are fully explained to and accepted by the client.

On 7 January 2020 at 1:39 pm All hat no cattle said:

@Tash
ignoring the vitality bit (because I agree)
I wanted to respond to this because I grow weary of comments suggesting overblown responses from the authorities, courts, DRS schemes to miniscule differences to how we each go about formulating and dispensing our advice.

Accepting the unlikely scenario of "the next call being to his lawyer..." If this was a complaint (beginning with the adviser's internal process, which would swiftly conclude "nothing to see here) in which the client refused to accept their outcome (claim was paid at the amount the policy said it would be) and the DRS was being asked to consider the adequacy and suitability of the advice, I suspect it would be laughed out of the hearing.

Reason?

That similar-but-not-identical "friend's melanoma" that "got a bigger payment" from some other insurer is nothing to do at all with the client's circumstances and the policy they have. His policy did what it said it would do. End of story.

The exact circumstances of the claim they ended up with were not being considered when the advice was being given at the time. So the actual claim has nothing to do with testing the adviser's conduct, suitability of the advice. God help us all if it ever does!

The policies in the example both have bits they do better than each other. An argument for either, based on any particular feature, could have been made. But the choice will have been based on coverage for the most common major claims, price, outside research/ratings, the client's own fears/experience, and how the cover fits into the wider plan.

Unless the adviser knows exactly which fate awaits the poor client then the eventual minutiae of the eventual partial claim is utterly irrelevant for a DRS complaint. Especially in the minor skin cancer example provided. In the big stuff the two policies' response would have been pretty much identical. Massive stroke? Full payout either way. Full-on cancer? Same. Heart attack? 100% paid.

The client has not "missed out" (on the difference between what his friend got and what his policy paid) on anything. FFS Detecting and dealing with a cancer before it gets really bad (- bad enough for full payout) is a win! Getting his partial payout afterward is a bonus – had he gone and bought cover from some bank teller he might not have got anything!

On 17 January 2020 at 9:37 am BayBroker said:

I've added Vitaltiy to a number of clients' new covers. I have also sold AIA cover without it.

As with all advice it is "what's right for this client".

JP - I'm a bit confused about your comment about Vitality rewarding good health until you don't have it? The stats/data that comes from Vitality doesn't impact premium at all. If someone becomes less healthy the insurance premium doesn't change.

What does impact it, is things like activity etc. However if a client has had Vitality for 10 years and had 10 years of discount benefit whilst being well insured isn't that a good thing?

Anyway, as mentioned, for me its a case by case thing. Yes for some, no for others.

Lastly - Skeptical - QM doesn't add the discount by default. Its a setting controlled by the adviser. I have it turned off so I can show the standard premium for all companies. THen I discuss Vitality if it looks as though the client is going down the AIA route.

On 17 January 2020 at 2:32 pm taka dan said:

bay broker good points but I get the point about premiums increasing when sick. I have Vitality personally and I have qualified for Platinum. My current good health allowed me to do this as it meant I receive all the activity points and all the extra points following the basic medical check up at Life Pharmacy. If my health deteriorates I may become less active and also will receive less points from the check up so I will lose Platinum status. This means I will lose the discount and all things being equal this means my premiums rises - driven by me becoming sick. So when I most need the cover it becomes less affordable.

I am enjoying Vitality but it is "free" for the 1st year.

At a macro level all the admin, extra stuff, marketing must be costing Viatlity and AIA a fortune (no wonder they have so many staff). Someone has to wear these costs so it is the customer.

My concern is Vitality is a negative sum game at a macro level with all the extra admin and marketing costs ultimately imposed on the consumer. Unless of course it really does drive better lifestyle and health outcomes.

Partners Life criticises Vitality

Partners Life has hit out at AIA’s new Vitality programme – without naming it directly – saying that advisers needed to be comfortable with the prospect of recommending benefits that could change.

Tuesday, December 17th 2019, 1:51PM 12 Comments

Comments from our readers

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