Johannesburg – Financial services group Discovery has been globally recognised for its role in successfully creating shared value in insurance.
A report published by nonprofit consulting firm FSG and the Shared Value Initiative listed Discovery, along with three other companies applying the idea of shared value. The concept was proposed in 2011 by Harvard Business School professor Michael Porter and FSG's Mark Kramer.
The report indicates that insurance companies have a role in benefiting society by protecting individuals and organisations from adverse events. Insurance companies are also more profitable when societal conditions improve. For example reducing accidents, improving health and helping organisations be more prepared for economic risks all help improve the profitability of insurers, the report explained.
It unpacks three strategies to create shared value, namely to prevent risk and reward risk reduction, close the protection gap of the underserved and invest in assets that promote prevention and protection.
Discovery’s winning formula
Discovery has been operating for 25 years. The Vitality model was developed 20 years ago and aims to improve health outcomes through behaviour change incentives. Vitality offers rewards and discounts while promoting behaviour changes. It also makes use of technology and data analytics to promote changes in health behaviours, the report highlighted.
“Discovery’s Vitality business model has been shown to lower morbidity and mortality rates and, therefore, the cost of claims through independent research.”
Chief executive and founder of Discovery Adrian Gore said it is exciting to be part of the FSG report. “We have been doing this for two decades,” he said. The model operates across 15 countries. “Globally the model has worked remarkably well.”
He explained the model is powerful in that it has changed insurance markets and changed the lives of the individuals it serves. He commended the model for having the ability to change society for the better.
Gore said the health insurance business started out in a complex environment, which led to the discovery of the shared value model.
“South Africa is a wonderful, beautiful country, with real complexities, too few doctors, terrible levels of disease burden and a very complex regulatory environment to ensure we do not have the discrimination of the past.” This created a challenge in offering sustainable insurance.
WATCH: Adrian Gore on the shared value model
Discovery found a way to make people healthier by helping them manage their health better and make better health choices, and built it into insurance, said Gore. This resulted in greater value for insurance and shared value.
Gore said technology has been a powerful enabler of the model. Trends also show that people want institutions with a social impact and which are a force for social good. Most mortality risks are linked to the choices people maker about their healthcare.
Gore explained that people do not make good choices - they think in the short term and discount the future. Discovery learnt that helping people make better choices would make them healthier, and create economic value.
So far the results have shown that healthcare costs have come down 25% for those engaged in the model.
“As an industry we have the potential to uniquely share value and change the lives of people we serve… We can make people live longer, healthier, more productive and change society. I think that’s the power of shared value,” he said.
Read the Harvard Business Review article based on the report here.Read Fin24's top stories trending on Twitter: Fin24’s top stories