Discovery Life might charge unvaccinated people more for new policies - here's why

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Discovery Life says clients with new policies who don't want to vaccinate may be subject to higher premiums due to the increased risk.
Discovery Life says clients with new policies who don't want to vaccinate may be subject to higher premiums due to the increased risk.
  • People who want to buy new policies from Discovery life could face higher premiums if they are unwilling to vaccinate against Covid-19.
  • The new underwriting rules kicked in on 29 July 2021 and will only affect new policies.
  • The insurer says its research showed that the risk of dying after a Covid-19 infection is the biggest in the age ranges where insurers write most policies an thus it's incentivising people to vaccinate.

Discovery Life has become the first South African insurer to consider Covid-19 vaccination in its underwriting processes. The company said it is going to treat a refusal to vaccinate against Covid-19 the same way it treats smoking or lifestyle diseases such as diabetes when it determines premiums.

"Clients with new policies who indicate that they are unwilling to be vaccinated may, unfortunately, be subject to higher premiums due to the increased risk," the company said on Thursday.

These new underwriting rules kicked in on 29 July 2021. That said, Discovery is willing to adjust the premiums for unvaccinated customers who change their minds later.

In an interview with Fin24, Discovery Life CEO Riaan van Reenen said the insurer decided to adopt this approach because of clear trends that emerged in the past year.

But it had to consider the availability of vaccines first. And now that vaccinations will be available to the entire insured population from 1 September, it seemed like it was the right time to act because of the mortality risk that faces Covid-19 survivors.

Higher death risk where insurers write most policies

"We have seen through the Beta and the Delta variant that the disease is more rampant than was originally projected. So, our decision was a combination of seeing the vaccination efficacy, the availability and the longer-than-expected duration of Covid-19," said Van Reenen.

He said while Covid-19 adds significant risk to the health of life insurance clients across all age groups, Discovery Life's research showed that the risk of death rises far above the average population mortality rates for Covid-19 survivors in their mid-forties.

Discovery Life's data suggested that an average 75-year-old who is fully vaccinated has a similar risk of dying from Covid-19 to a typical 40-year-old who has not been vaccinated.

"The real epiphany for us while doing the research was that the impact on the insurance pool is actually the biggest in the age ranges where we write most policies, 40 to 50," said Van Reenen.

He said generally, there is a low mortality expectation in the insured population between the ages of 40 to 50 years. But a Covid-19 infection increases that risk almost tenfold.

How will this affect existing clients?

Existing Discovery Life policies will not be affected by these underwriting changes. But existing customers who apply for new policies will be subjected to the new rules. The company is actively contacting existing clients and assisting them in making bookings for the vaccines as soon as possible.

While the insurer is not forcing anyone to vaccinate, it is collecting data on who has done so. Although there are delays in data collection as some vaccination points capture this manually, Van Reenen said at least 20% of Discovery Life's policyholders had been vaccinated at the end of last week. Of the 60-plus client base, 45% had received vaccines, and the number has been climbing rapidly this week.

Apart from the mortality risk, Discovery Life is also concerned about the development of chronic diseases among Covid-19 survivors, called the morbidity risk.

Doctors and other researchers have been studying the long-term impact of Covid-19 on survivors since 2020. Organ damage and what is now officially termed "long Covid" are some of the long-lasting complications that are starting to worry insurers.

However, Van Reenen said long Covid was not a material factor right now as the medical fraternity was still trying to understand its long-term effect. But even before fully understanding the impact of long Covid, insurers have had to fork out more money to pay out living benefits such as income protection and severe illness lump sums in some severe cases of Covid-19.

"Our immediate risk is more elevated by Covid-19 itself. Even after vaccination, the insurance industry will still face a higher mortality risk in the short term while you've got community transmission," he said.

Discovery Life said by reducing risks arising from Covid-19, its clients can create savings which can then be returned to them. The company has a "Vaccination Max PayBack" offer.

It considers the vaccination status of the main policyholder. In the first year of their new policy, those vaccinated will get the maximum possible PayBack usually reserved for the healthiest and most active Vitality members.

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