PRODUCT OFFERS: Editorials: October 2019 / January 2020

image_pdfimage_print

Unintended
consequences

‘Rewards’ battle of giants over life policies might later extend to employee
benefits too. Sponsors of umbrella arrangements, take note.

Discovery could inadvertently have done competitor Liberty a huge favour by having initiated court proceedings to interdict Liberty from allegedly unlawful competition. The pre-trial brouhaha has created greater exposure for a Liberty product than its marketing department could possibly have dreamed.

More than this, it will take several months before the litigation eventually comes to trial. Then there’ll be an additional period before there’s a judgment and a further period, maybe years, before inevitable appeals are ultimately exhausted. Through all this time the Liberty Lifestyle Protector policy, with the “wellness bonus” to which Discovery takes such exception, will be so entrenched as perhaps impossible to untangle.

In essence, Discovery contends that Liberty has infringed the Discovery and Vitality trademarks. By this means, Liberty is implicitly benefiting from the “rewards” programme that Discovery claims as its own.

“The revised Liberty life insurance policy with the Wellness Bonus is designed around, and wholly dependent on, a wellness programme that Liberty does not itself offer,” argues Discovery Life chief executive Hylton Kallner. “Liberty does not have its own wellness programme that it can offer to the public in conjunction with the Liberty Lifestyle Protector insurance product to enable them to benefit from the Wellness Bonus.”

Liberty is opposing the application because, as chief executive Dave Munro indicated at the group’s presentation of interim results, it believes that Discovery is attempting not to prevent unlawful competition but to restrict lawful competition. He also insists that personal information about a client belongs to the client, not to a company.

Kallner . . . stop!

Since there’s no use by Liberty of a Discovery mark, elaborates Dave Jewell who manages Liberty retail solutions, there can be no confusion in the minds of clients. Amongst the series of questions asked in policy applications, membership of any health programme is merely one that’s linked to other health data such as exercise frequency. It’s for potential Liberty clients to disclose their Vitality status, if they want, and it will have a bearing on their Liberty cash-back bonus, if they want.

This battle over a life policy can spill into a full-scale war, engaging a multiplicity of life offices and others in the business of retirement funds, because Discovery has now entered the arena of employee benefits.

In elaborate promotional material, released at the recent Institute of Retirement Funds conference, Discovery boasts a “world first” by uniquely “incentivising and rewarding sound financial behaviours”. There are “shared-value rewards for people who save,” it says. At root are bonuses for loyalty.

Financial advisors will need carefully to scrutinise the terms and conditions, particularly the precise circumstances for “boosters of up to 15%”. Discovery will reward employees for “investing for longer” provided they transfer their retirement savings to it. They’ll also be rewarded if they manage their health and wellness through Vitality, and there are further rewards for investment in Discovery group risk.

Also, employers can pay zero fees for administration of retirement savings. To pay nothing for this service, all employers must do by end-December is use Discovery for their employees’ health needs and sign up with Discovery retirement funds.

There are at least two possible difficulties. One is that the biggest boosters seemingly extend primarily to the more expensive portfolios which, held in Discovery funds, might or not be amongst the better after-costs performers. Another is that, given affordability constraints on poorer members to preserve, boosters imply their disadvantage against the wealthier.

And then there is consistency with priorities of National Treasury for retirement-fund reform: simplicity and comparability of products, and portability between funds for members wanting to switch without penalty. On each, the purported Discovery game-changer could be liable for challenge.

As if the fanciful National Health Insurance didn’t already give Discovery enough to worry about.

Munro . . . no!