INSURER Liberty has bucked the trend of offering clients rewards by canning its programme, saying that it did not add value to customers and the company.
This could be a sign that the market is overloaded with rewards schemes that often offer similar benefits. The shelving of the scheme by Liberty also raises questions about whether rewards structures are really effective in retaining clients.
John Maxwell, CEO for Liberty’s individual arrangements division catering for retail clients, said the paid-for rewards programme was closed to new members at the end of last month and would not exist after the end of March next year. He said gym benefits would be stopped over the next year.
"We looked at it from a client’s point of view and we asked ourselves what are the benefits to our clients. Our clients were paying more than they were getting. "For the sustainability of the scheme (rewards) we would have had to increase the charges substantially ... that was the drive behind us terminating it. But we will fulfil contractual obligations. We weren’t making money and the clients weren’t making money."
Mr Maxwell said with the Liberty rewards scheme it was difficult to differentiate from other competitors. But he said this did not mean the company would not look at value-added services for the client.
In 2002, Liberty invested millions of rand in its rewards structure "Own Your Life" and signed up partnerships with a number of companies. Its clients received discounts including free parking in Sandton City, when they signed up. One of the companies that have seemingly done well with its rewards structure is rival insurer Discovery with Discovery Vitality.
The difference with the Discovery Vitality model is that it encourages clients to lead healthy lifestyles, as well as practise good driver behaviour. The clients get rewarded for good behaviour.
On the other hand, Discovery benefits as healthy clients are less likely to be always sickly and prone to lifestyle diseases. Discovery Vitality reported a R31m normalised profit from operations in the six months ended-December 2015.
For the past 12 years, Liberty has been the largest writer of retail risk products by sum assured in the affluent market in SA. Mr Maxwell said the company would grow the business by continuing to sell innovative risk and investment solutions to clients. Liberty’s retail business has 2-million customers and 1.5-million customers are core affluent clients.
Mr Maxwell said Liberty had also reviewed the way it operated in the emerging consumer market (low-end market).
"We’ve an existing entry-level business that we are actively managing. But we need to look at how do we improve the engagement with our customers."
He said Liberty would not be aggressive in selling to the entry-level market until it understood how to engage that segment better. Mr Maxwell said the market was vulnerable to changes in the economy, such as food price, fuel inflation and interest rates that ate away disposable income.