Actuary angst: Liberty trumps Discovery in court
It’s good news for Liberty in the courts, especially after it made a hash of its Covid-19 communications
Liberty has suffered many blows from Discovery over the years.
Most of Discovery’s top management defected from Liberty — including founding CEO Adrian Gore and his longtime second-in-command, Barry Swartzberg — as did many of Discovery’s top financial advisers.
So there must have been an extra pleasure for Liberty last week as the courts overruled Discovery’s application to ban Liberty’s new wellness scheme. This bonus is offered to clients of Liberty’s Lifestyle Protector death and disability range, and for an extra 5% premium it gives cash back after five years.
The extent of the bonus depends on your status in a recognised wellness plan. For now SA has only two such recognised plans: Discovery Vitality and Momentum Multiply. So Liberty, Discovery argued in its failed bid, was using the knowledge built up by Vitality to assess its own clients.
Liberty could have taken another stab at its own wellness plan, but it has botched both attempts in the past — Freestyle and OwnMyLife. These two fell somewhere between Vitality and a rewards programme such as Standard Bank’s UCount or Absa Rewards.
Says David Jewell, head of retail solutions at Liberty: "We could have set up another wellness programme but we believe that any information that a client wants to give us about themselves which is relevant to their risk profile should be their choice."
Wellness programmes can only work effectively if they are tied into medical aid with the rich health information on each client that goes with it, and Liberty has exited the SA medical aid market.
Judge Raylene Keightley said in her judgment that Vitality members paid for their membership — it was their personal information and they were free to make it public.
Keightley said she had to consider the correct balance between the rights of Discovery as the trademark proprietor and those of Liberty as a competitor, and of course, the public’s rights.
She said that even though Discovery had been a major innovator, this did not give it licence to stifle competition.
Jewell says: "We have given Discovery full credit for its programme and no reasonable person — certainly no professional intermediary — could mistake Vitality for a Liberty product."
He concedes that Liberty clients would benefit from what has been built in the Vitality back office, "but clients have paid Discovery handsomely for services rendered".
Using third-party information to build up mortality and morbidity information, known as risk proxies, has been a common feature of the life insurance industry for many years.
Discovery, meanwhile, has conceded defeat and will not follow Jacob Zuma and Peter Moyo in pursuing a Stalingrad strategy right through the court system.
Hylton Kallner, CEO of Discovery SA, says he is disappointed that the court ruled against it but it does not intend to appeal.
"We hold Liberty in high regard as a competitor," says Kallner, who also worked there before Discovery, "but felt, and remain deeply of the view, that using our intellectual property without our consent or paying anything for its use or its benefits is morally questionable."
Putting a positive spin on it, he says Liberty’s actions are a compliment and endorsement of the Discovery shared-value model, and Vitality’s role in driving better behaviours to improve the individual health of millions of people.
Momentum paid a compliment to Discovery when it created Multiply, a very close imitation of Vitality.
Multiply head Johan Kleu says it never discussed joining the case against Liberty, mainly because Discovery and Momentum have the same main shareholder in Rand Merchant Investment Holdings, which owns about 25% in each group.
For Jewell and the Liberty retail team it follows some poor communication at the start of the lockdown.
Liberty has the most homogenous life book of the large companies, focused on the affluent English home-language market.
But it made some announcements at lockdown which were open to misinterpretation by its relatively financially astute clients.
Some read that Liberty was suspending a number of key benefits and panicked.
In fact, just the sale of these products was being suspended.
"It is impossible to know how to price these products during the epidemic," says Jewell.
After all, an Income Protector, or sickness benefit, at the price sold before Covid-19 came to SA, would be very attractive right now.
Jewell says Liberty still offers sickness benefits provided you are prepared to wait three or six months for them to kick in.
Retrenchment protection is also not being sold, nor is its Business Overhead Protector, which looks after the overheads of self-employed people when they are sick.
Jewell says existing policies will be honoured.
Liberty should have sufficient resources to pull through, whether on its balance sheet, through its re-insurers or through parent Standard Bank.
But it is clearly pulling back benefits.
It plans to defer life cover for three months after application for commercial pilots — not that they will be doing much over the next while — as well as for mineworkers, health-care workers and those in service industries such as hairdressers, drivers and waiters.
It will also refuse to give immediate cover to conditions which will be more vulnerable to Covid-19 such as diabetes, autoimmune diseases, asthma and cancer.