Loyalty and points programmes are nothing new – retailers and airlines have been running these for years, with sometimes mixed results. Their purpose has traditionally been to drive just one aspect of consumer behaviour: repeat purchases, whether of household goods or flight tickets.

Loyalty programmes have been shown to increase customer retention and the spend per member transaction (in retail contexts). They can generate huge volumes of data, which if used correctly, can facilitate better, more personalised relationships with customers – and upselling.

However, the ubiquity of loyalty programmes has led to a measure of scepticism on the part of consumers who can find them unduly complicated (resulting in fewer people qualifying for rewards, which in turn leads to diminished participation – a vicious circle). Where benefits or rewards are perceived as barely attainable – as in the case of air miles – customers soon become disillusioned.

It has even been suggested that inertia – caused by the perceived inconvenience of changing to a different scheme – is a more important driver for loyalty.

Measuring success

Given the pros and cons of loyalty schemes, how can the success of the rewards programmes offered by leading health insurers be explained? Schemes such as Discovery’s Vitality, Momentum’s Multiply and Zurreal (for Resolution Health and Spectramed members) have captured the imagination of hundreds of thousands of South Africans.

Rather than incentivising purchases, health insurance rewards programmes seek improved health outcomes for members through promoting behavioural change. The logic is simple and sound: healthy people make fewer, smaller, less frequent claims on their health insurance, the insurer’s costs reduce and members of medical schemes with integrated risk products enjoy discounts on their premiums for these products.

In fact, data from Discovery Vitality shows that engaged members have significantly longer life expectancy than both uninsured people, and insured people who are not actively engaged in the rewards programme.

Health insurance rewards programmes try to instill and perpetuate a virtuous circle: members are rewarded for making healthier choices, which encourages them to make more and better choices. When the rewards themselves are related to healthy lifestyles (e.g. money off running shoes, or free smoothies) the positive effects are compounded.

These rewards programmes are a neat fit with some of the major trends currently underlying business growth and consumer behaviour: big data, gamification, personalisation, wearable tech – and even narcissism. The big data point is an obvious one: your health insurer already knows a great deal about you, and by submitting the data required to earn rewards, they further refine this picture. However, given that this data is primarily used to benefit you (lower premiums, free stuff, discounts), nobody seems to object.

Trends in Rewards Programmes

Personalisation is facilitated by big data – the more your health insurer knows about you, the better they can meet your needs (and, of course, sell you additional products).

Gamification involves awarding points, badges or status for achieving certain goals. This gives people bragging rights with their friends, but also enables them to achieve higher status levels (e.g. moving up from Silver to Gold) with an associated increase in rewards. Numerous health-related apps (such as Strava) work on this principle and on people’s urge to share information about themselves via social media.

Wearable tech is a huge lifestyle and fashion trend, from running watches to step-counters. As for narcissism, well, if we’re honest, who isn’t fascinated by data about themselves?

Given that all these trends converge in health insurance programmes, it’s no wonder that they have proven to be so popular. Discovery reports that almost 300 000 South Africans complete a health check assessment each year, while some 1.7 million weekly rewards (for reaching points targets) are redeemed annually – that’s around 5 000 per day. Discovery Vitality members are estimated to exercise 25% more than non-members.

The instant gratification aspect of rewards programmes is also important: humans, although rational, are notoriously bad at assessing long-term benefits. We know that if we quit smoking (for example) our risk of dying of lung cancer is reduced, but we can struggle to motivate ourselves based on a distant and uncertain reward. Knowing that we will get a free coffee if we go to the gym twice more before Friday, however, is a much easier concept to grasp.

It’s also human nature to only claim rewards that involve no further effort, so ironically, thousands of unclaimed rewards are allowed to lapse each month.

Health insurers are constantly innovating to keep rewards programmes fresh and relevant, with booster schemes (which give money back on purchases when targets are consistently met) being a recent development. The Zurreal programme gives members money back rather than points.

Conclusion

In summary, rewards schemes have demonstrated that people can be motivated to change their habits – and be healthier – through a combination of financial and non-financial incentives, and the opportunity to increase their status. It’s hard to see them as anything other than a win-win scenario for all involved.

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