Healthier Premiums: using technology to drive positive behaviour in insurance

Discovery is revolutionising financial services by leveraging technology to drive behavioural changes in its customers

Using insurance has allowed people and businesses to substitute unpredictable, often catastrophically large expenses for stable, relatively small payments over time. Although many of the first insurance schemes in operation were not-for-profit mutual funds (where contributions from all policyholders contributed to covering loss for policyholders who experienced a misfortune), today, the insurance industry is a competitive and potentially highly profitable one.

One of the most important factors that affects an insurers profitability is the underlying risk profile of its policyholders. Knowing this, insurance companies have long been trying to improve the profile of their policyholders by discriminating on factors that indicate higher probability of risks eventualising: set higher car-insurance premiums for teenage drivers who are likely to be reckless, offer lower life-insurance premiums to healthy young males with no family history of diabetes, and so on. Most of the factors used have traditionally been static, either demographic in nature or point-in-time data. These factors are assumed to be good indicators of future behaviour and the insurable outcomes they bring about. But what if this future behaviour can be tracked in real time? What if this future behaviour can be shaped in a way that improves outcomes?

One South African insurance company has been finding out.

Discovery, founded in 1992 with an initial focus on health insurance, has been using technology to incentivise healthy behaviour through its Vitality rewards programme1. By encouraging policyholders to live more balanced lifestyles, the business hopes to create a win-win, where consumers can live longer, more fulfilled lives, and the insurance company can be more profitable in the long term thanks to having to pay out fewer claims.

Discovery began this journey by encouraging policyholders to visit the gym more regularly, partnering with Virgin Active Health Clubs to offer members up to 80% off gym subscriptions, provided visits were above a minimum threshold2. As technology has improved and become more ubiquitous, Discovery has become more precise in encouraging healthy behaviour. First, Discovery links policyholders’ membership numbers to loyalty cards at national supermarket chains3. By accessing the purchasing data of its policyholders, Discovery can reward healthy eating (by offering cash back on purchases of vegetables and other healthy foods) and penalise less healthy behaviour. More recently, Discovery has linked its Vitality rewards programme to results from wearable technology and mobile applications that monitor exercise3. Not only has this allowed Discovery to be even more precise in allocating rewards to “good” behaviour, but has also given it access to a wealth of data (including heart rate, blood pressure and exercise duration) which will better equip it to predict how certain behaviours affect health outcomes in the future.

Video: Your Journey to Wellness with Discovery Vitality

A natural extension of its health care business was a move into life insurance1 (launched in 2001) where the promotion of a healthy lifestyle is another clear win-win. The popularity of the Vitality rewards programme enabled Discovery to leapfrog established life insurance companies (who have been operating for more than a century) to become South Africa’s leading life insurance provider within 15 years1. Next, it moved into short-term insurance with the launch of Discovery Insure for vehicles. Here Vitality rewards continue to be used to drive good behaviour. A small tracker is installed in each policyholders’ vehicle, which transmits real-time data, including speed of driving, braking, accelerating and cornering data and even times of day driven4. Discovery rewards safe drivers with cash back on fuel purchases and reimbursements on public transport costs.

Despite concerns that many analysts have about data privacy5, Discovery has been very popular with consumers and has continued its record of impressive growth since being founded6. Although funding Vitality and the associated behavioural changes comes at a high cost, Discovery is betting that the long-term benefits of having less risky policyholders will far outweigh the near-term expenses.

As the team continues its global expansion into other financial services (Discovery was recently awarded a retail banking licence in South Africa) and other geographies (Discovery and Vitality are directly present or through partnership in more than 5 countries including the UK, USA and China7), I hope they are taking some time out to get a daily run in. [687 words]



  1. Gore, A, May 2015. How Discovery Keeps Innovating.McKinsey Quarterly (McKinsey & Company). Accessed online:
  2. Our Wellness and Rewards Partners. Virgin Active website. Accessed online:
  3. Du Preez, L. 29 April 2013. Discovery’s Vitality. IOL News Website. Accessed online:
  4. Vitality Drive. Discovery Website. Accessed online:
  5. Lewis, A., 4 March 2016. Companies Want to Disclose Employee Health Data to Shareholders, and It’s a Bad Idea. Harvard Business Review. Accessed online:
  6. Fin24, 10 Sep 2015. Discovery Posts Healthy Profits. Accessed online:
  7. Discovery around the world. Discovery Website. Accessed online:


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Student comments on Healthier Premiums: using technology to drive positive behaviour in insurance

  1. Thank you for this fascinating post! I definitely agree that digitalization is one of the most important topic for insurers world wide, both due to the disruptive effects of digital/fin-tech start-ups which offer alternative insurance concepts or access to data for holistic risk calculations which could potentially compete for market share, and due to the opportunities big data represents for the actuary side of the business. So far, my impression is that regulation and data security concerns (both on the side of the customer, especially in Europe, and on the government side) have held the industry back in adopting broad disruptive digital programs.
    I found that Italian insurer Generali is an interesting case study on digital solutions in the health insurance industry, similar to the company you wrote about. Generali recently introduced ‘Generali Vitality’, a program which rewards customers if they keep a healthy lifestyle based on big data analytics and managed via a custom app. It remains to be seen, however, how customers react to the different pricing options in the long run.

  2. Great post, PP. The meeting of behavioural economics and big data is a fascinating space that will certainly become more ubiquitous in the coming years. I wonder how the long term economic sustainability of the model develops; it must be the case that certain consumers’ behaviour will simply not change. How does this play into the model and how is their risk priced? Is it a case that there continues to be a subsidisation of their risk by less risky customers, or will they effectively be priced out of the market?

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