Discovery

Discovery Insure 2012 Product updateFrancois Theron | COO Discovery Insure

Mainstream emergence of telematics technology as a

premium rating factor

1

AccelerationBraking

Cornering

Cornering

Background to the launch of Discovery Insure

Rising and volatile fuel price negatively impacting cost of

vehicle ownership

3

The relevance of Discovery’s behavioural economics

experience to short-term insurance

Understand and reward good driver behaviour

Mechanism to incentivise positive behavioral change

Ability to positively impact road safety

2

Causes of motor vehicle accidents

49%

9%

34%

8%

Pedestrian

related

Vehicle

safety

Road

conditions

Inappropriate

driving

Fuel price Oil price

0

20

40

60

80

100

120

140

160

R 0

R 2

R 4

R 6

R 8

R 10

R 12

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Actual fuel price (Rands) Actual oil price (US dollars)

The Discovery Insure Product Platform

Comprehensive motor insurance

State-of-the-art vehicle and passenger safety

Stolen vehicle recovery at no additional cost

ImpactAlert™:Pro-active emergency response

Vehicle Protector™: Tools to improve

vehicle safety

Family Protector™:Additional family

safety features

Fuel rewards

Get 50% of fuel spend back each month,

Or

100% of fuel spend to fund policy excess

Flexible options for household

and personal

cover

HomeProtector™: Security and emergency

accommodation

No excess on burglary, hijacking,

storm or fire

The better you drive, the higher your status,

the greater your rewards

Driver Quotient™ measures driver

performance

4

Discovery Insure: The year in review

Press coverage Key metrics

311 100 fuel transactions

7.7m ℓitres of fuel purchased at BP

R7.93 bncomprehensively

insured household and personal cover

20 100 driverstracked in real time with DQ-Track

R3.25 bnvehicles comprehensively insured

132 million kilometresof behavioural data

The Discovery Insure business cycle

Experience review

Product enhancements

Marketing and clientsupport


Experience review



is having a

on client behaviourtangible impact

Vitalitydrive

1

Behaviour change manifests in three key areas

0

1000

2000

3000

4000

5000

6000

7000

8000

Jun

-11

Au

g-1

1

Oct

-11

Dec

-11

Feb

-12

Ap

r-1

2

Tiger Wheel and Tyre MultiPoint checks

Over 7 000 MultiPoint checks completed

High engagement in driver awareness and vehicle safety

activities

100

102

104

106

108

110

112

114

116

118

Month 1

Month 2

Month 3

Month 4

Month 5

Indexed Driver Performance Scores(Month 1 = 100)

17% improvement in Driver Performance Scores

Demonstrable changes in driver behaviour

BP National market share

Proportion of petrol spend at BP for

VitalityDrive clients

BP market share analysis

77% of fuel spend at BP outlets

Substantial shift in day-to-day consumer choices

77%

20%

Proportion of petrol spend at BP for

Vitalitydrive clients

BP national market share

in driver behaviour are directlycorrelated with

motor vehicle accidentsfewer

Improvements

2

and

insurance costslower

Driver behaviour is directly correlated with accident risk

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Base Neutral Engaged Advanced

Indexed loss ratios by Vitalitydrive status(Base = 100%)

100%

74%

54%

31%

facilitates a robust

of the underlying causes of motor vehicle accidents

understanding

DQ-Track

3

South Africa

Brazil

Russia

China

USA

India

UK

South Africa’s roads are amongst the most dangerous in the world

Source: List of OECD countries by traffic-related death rate

Broader societal costs associated with road accidents are substantial

Road fatalities per capita (per 100 000 inhabitants p.a.)

South Africa’s fatality rate is significantly higher than other BRIC countries, with 14 000 road fatalities per year

33.2

18.5

19.9

16.5

12.3

11.1

3.59

Unique insights into the causes of motor vehicle accidents

53%

37%

32%

16%

5%

Late night driving

Braking Speeding Accelerating Cornering

Note: Drivers can have more than one type of risky event prior to an accident

Type of risky behaviour displayed prior to an accident

Drivers displaying risky driving behaviour 15 minutes or less prior to a serious accident

No39%

Yes61%

Measureable behaviours are directly correlated with accident risk

1.3 1.40.8

9.7

Morning Lunch time Early evening Late night

Relative accident risk, 2011 Insure data

There is a ten times higher likelihood of having a motor vehicle accident at night

9.7

0.81.41.3

are emerging between

and other drivers of insurance risk

driving behaviour

Strong correlations

4

Cross-company analytics provide unique insights into the drivers of insurance risk

37%

48%

67%

82%


10%

8%

4%

1%


P(Credit default) is the probability of being 3 months in arrears or worse at least once during a year

Case study 1: Wellness outcomes are directly correlated with driving behaviour

Percentage of healthy* drivers by Vitalitydrive status

*Note: Healthy is defined as being on Gold or Diamond Vitality status

82%

67%

48%

37%

Credit default rates by Vitalitydrive status

Case study 2: Credit risk is directly correlated with driving behaviour

1%

4%

8%

10%

is providing

levels to clients

high coverage

The core product

5

Discovery Insure claim payments reflect comprehensive product offering

Discovery Insure claims payout ratios

Repudiated2%

Approved98%

Analysis of repudiated claims

No cover44%

Fraud22%

Pre-existing damage

16%

Other9%

Unlicensed driver

9%


1

2 3 4

5

Experience review



Rewards change client behaviour

98% benefit coverage ratios

Unique client data provides strong predictor of insurance risk

Young adults display high risk driving behaviours

Vitalitydrive engagement lowers accident risk

2012 Strategic product objectives

1

2

3

Restructure Vitalitydrive to simplify and enhance the benefits

Create targeted incentives to drive a step change in road safety for young adult drivers

Enhance coverage levels across the product


1 Restructure Vitalitydrive to simplify and enhance the benefits

2

3



Discovery Insure launch

R 7.00

R 7.40

R 7.80

R 8.20

R 8.60

R 9.00

R 9.40

R 9.80

R 10.20

R 10.60

R 11.00

R 11.40

R 11.80

R 12.20

R 12.60

Jan

-10

Feb

-10

Mar

-10

Ap

r-1

0

May

-10

Jun

-10

Jul-

10

Au

g-1

0

Sep

-10

Oct

-10

No

v-1

0

Dec

-10

Jan

-11

Feb

-11

Mar

-11

Ap

r-1

1

May

-11

Jun

-11

Jul-

11

Au

g-1

1

Sep

-11

Oct

-11

No

v-1

1

Dec

-11

Jan

-12

Feb

-12

Mar

-12

Ap

r-1

2

May

-12

Jun

-12

Increasing relevance of the fuel benefit construct

Fuel price progression since the launch of Discovery Insure(Rand per litre)

Gauteng Prices (Pricing Zone 9C), 95-Octane unleaded

R8.45

R10.23

R11.67

Composition of Vitalitydrive rewards

DiscoveryCard22%

Travel3%

Fuel75%

Composition of Vitalitydrive fuel rewards

Rewards at other stations4%

Rewards atBP stations96%

Analysing the different rewards structures available through Vitalitydrive

Factors informing the restructure of Vitalitydrive rewards

75% of Vitalitydriverewards in fuel

96% of all fuel rewards earned at BP

More than 1 in 3 Insure clients do not have a DiscoveryCard

Excess Funder Account balances

R4m

1 3

75%

96%

Registrar guidelines to remove ‘non-risk’ travel and card rewards

Risk-based

reward

Experience on supported policies

20%+

in

Boost BP fuel cash back

01

Clients can now get up to 50% of their BP fuel spend back

Complete and pass the Tiger Wheel & Tyre Annual MultiPoint

check

You automatically get 20% cash back on your monthly BP

fuel spend

20%You get

50%Cash back on your BP fuel spend every

month

INSURE YOUR CAR AND HOME AND ACTIVATE

Note: Your monthly fuel rewards are based on your number of DQ Points earned

Boost your Excess Funder Account and double your fuel rewards to

100%





R4m

1 3

75%

96%


20%+

in


01

Ensure maximum level of fuel reward is

available to all clients

02


Risk-based

reward


The revised fuel rewards structure ensures that the maximum level of fuel rewards are available to all clients

Policy type AutomaticMultiPoint

check

Car only 10% 25%

Car and home 20% 50%

Paymentmechanism

AutomaticMultiPoint

check

Other 10% 25%

DiscoveryCard 15% 40%

2011 BP fuel rewards structure 2012 BP fuel rewards structure





R4m

1 3

75%

96%


20%+

in

Ensure maximum level of fuel reward is

available to all clients


01

02

Embed an Excess Funder Account in all Vitalitydrive policies

03


Risk-based

reward


Vitalitydrive members automatically get up to 10% of their premiums paid into their EFA each month

Percentage of car insurance premium paid into the Excess Funder Account every month

0%

Base

2.5%

Neutral

5%

Engaged

10%

Advanced

status

Plan excess

R 900R 1 800

R 2 700

R 3 600R 4 500

1 2 3 4 5

The Excess Funder Account Booster in action

End Year 2 End Year 3 End Year 4 End Year 5End Year 1

R9,600

R19,200 R28,800 R38,400 R48,000

Excess Funder Account Booster

Embedded Excess Funder Account

Opportunity for clients to build real long term insurance equity

Access 50% of the fund after three years

Excess Funder Account balance for a client on Advanced status with a motor premium of R750 per month and R400 monthly fuel rewards





Maximum fuel rewards available to all clients with

supported policies



R4m

1 3

75%

96%


20%+

in

01

02

03ExcessFunder

Account

10%


Risk-based

reward



2Create targeted incentives to drive a step change in road safety for young adult drivers

1

3



ExcessFunder

Account

50%

Young adults account for a disproportionately high frequency of motor vehicle accidents and accident related deaths

Over 90% of young adults drive late at night

Proportion of young adults driving late at night, 2012 survey

Drive during the day8%

Drive late at night92%

Motor vehicle accidents account for 75% of young adult deaths

Proportion of young adult deaths by cause

Natural25%

Motor vehicle accidents75%

NightDriver gives

discounted home drive services and preserves the

Rewards Fund balance

The Discovery Insure Young Adult plan

Up to 50% of

their BP fuel spend back in cash

25% of car

premiums into the Young Adult

Rewards Fund

• Up to R200 per month

paid into Rewards Fund based on Vitalitydrive status

• Reduced by R10 per km driven between 23:00 and

04:30

MONTHLY

BOOSTER

The Young Adult plan in action

25% of car premiums into Young Adult Rewards Fund

01Regular feedback to improve your driving

02

Every six months, you can withdraw the available money in the Fund

05

For every kilometreyou drive between 23:00 and 04:30, R10 is deducted from the Fund

04 NightDriver gives you access to RoadTrip or SmartGuyz at a substantial discount

or

23:00

04:30

Note: Extensive night driving will result in a premium increase after six months

Boost your Fund by driving well

03Drive Well

Base - R 200

Neutral R 0

Engaged R 50

Advanced R 200

Young adults can earn unprecedented rewards with Discovery Insure

• Name: Dan• Age: 22

Profile

• Fuel spend: R 800 per month• Car premium: R 680 per month

(no home insurance)• Driver status:

• Engaged for 2 months• Advanced for 4 months

• Night driving: 45 kms

Driving experience over 6 month period

Dan gains R2 670 overall from the Young Adult plan over 6 months

R 0

R 200

R 400

R 600

R 800

R 1 000

R 1 200

1 2 3 4 5 6

Month

Cumulative fuel rewards

Rewards fund after 6 months

R 0

R 500

R 1 000

R 1 500

R 2 000

25% of premiums

Vitality status booster

Night time driving

Cumulative value

Dan gains R1 200 from his fuel benefits

Dan gains R1 470 from his Rewards Fund

+


3 Enhance coverage levels across the product

1

2



ExcessFunder

Account

50%

25%

Enhancements to liability cover and offroad use

Liability cover introduced for sailboats and jet skis

Caravan contents included in all risk cover

Enhancements to cover, removed restrictions on use of

car and extended territorial limits

Improved cover for accidental damage, goods in open and

cover for goods away from home

Broader range of cover for unspecified items

Cover enhancements effective 1 August 2012

Marketing support: Plan Guide


1

2

3




50%

25%

ExcessFunder

Account

10%


1

2 3 4

5

25%

Experience review








Up to 50% of BP fuel spend back

Up to 10% of premium paid into your Excess Funder Account

Up to 25% of car premium paid into Young Adult Rewards Fund

Benefit enhancements in each area of cover

50%

ExcessFunder

Account

10%

2012 Marketing and client support

1

2

3

Leverage our breadth of data and analytic capabilities to improve premium efficiency for Select clients

Focus on areas to enhance the service experience for clients and advisers

Digitalise the advice and new business process

“Big data” can be used to generate significant financial value

Source: McKinsey Global Institute analysis

US health care

• $300 billion value per year

• ~0.7% annual productivity growth

US retail

• >60% increase in net margin possible

• 0.5–1% annual productivity growth

Global personal location data

• >$100 billion revenue for service providers

• Up to $700 billion value to end users

Manufacturing

• Up to 50% decrease in product development, assembly costs

• Up to 7% reduction in working capital

Discovery Insure is uniquely positioned to understand insurance risk

VEHICLE CHECK

Select client pricing model

Save

5%on premiums

Select clients automatically qualify for

a 5% discount in premium

Vitality status: Silver, Gold or Diamond

Select client qualifying criteria

1 2

DiscoveryCard: Goldor Platinum

Discovery Life plan ofR3 million or more

Silver

Gold

Diamond

ANDOR

Wellness engagement Socio-economic factors

100 000 clients automatically qualify for 5% premium discount

Select client pricing model

Save

5%on premiums

Select clients automatically qualify for

a 5% discount in premium

DiscoveryCardCredit risk profile and retail behaviour

Discovery Vitality Wellness choices

Discovery LifeBenefit choices and risk attitudes

Discovery Invest Risk attitudes

Dynamic behaviouralalgorithm assesses risk profiles across multiple

variables

Save up to

25%on premiums

Select clients can save as much as 25% on their

premiums

Automatically applied during quoting process

R 2,000

R 1,125

R 500

R 300

R 0

R 500

R 1,000

R 1,500

R 2,000

R 2,500

Discovery Insure premium Select discount Fuel rewards Excess Funder Effective premium

R500

The impact of being a Discovery Insure Select client

R150

Case study: Select client; R1 000 pm BP fuel spend; 1000 DQ Points; Car insurance premium: R1500

ADVANCED

R1 150 NetsavingR2,000 R500

R850


2Focus on areas to enhance the service experience for clients and advisers

1

3



Save up to

25%on premiums

SmartService is providing Insure clients with a unique service experience

New business

• Over 16 000 plans already activated

• 84% of new business applications are finalised within 4 hours

• 96% of underwriting is completed within 4 hours

DQ-Track installations

• Over 20 000 installations completed by our experienced technicians

• Focus on client experience: currently rated at 9 out of 10

• Continue to see a positive trend

Rewards

• Over R8 million paid out in Vitalitydrive rewards

• Over R4 million held in Excess Funder Account balances

Benefits and services

• Over R60 million paid out in claims

• 76% of stolen vehicles recovered by DQ-Track

FastTrack service from SmartClaims

Laptops GPS devices E-readers

Smartphones Cameras MP3 player

Tablets

FastTrack Claims Promise

If we fail to deliver on our promise, we will waive the excess on your claim

FastTrack approved items will be replaced within 24 hours in Gauteng or 48 hours in other large metropolitan areas

NightDriver from Discovery Insure

NightDriver– providing Vitalitydrive members access to a network of accredited home drive services

Subscribe to RoadTrip or SmartGuyz

• Subscribe and receive a discounted monthly fee based on Vitalitydrive status

• Allocated number of kilometres per month - charged thereafter

• Discounts up to 25% based on Vitalitydrive status

NightDriver is available in the larger metropolitan areas

Use SmartGuyz services without a subscription

• Contact SmartGuyz and pay a flat fee of R100 – first 10km included

• Normal tariffs apply thereafter

• No registration necessary –SmartGuyz will verify Vitalitydrivemembership

OR


3 Digitalise the advice and new business process

1

2



Save up to

25%on premiums

The Discovery Insure product platform generates unprecedented value for clients

Dave’s carR1 300 premium

R1 000 Fuel spend800 DQ Points for

six months

Linda’s carR750 premium

R1 000 Fuel spend1000 DQ Points for

six months

Home insuranceR530 premium

The case study of Dave, his wife Linda, and his son Dan illustrates the key benefits

Dan’s carR680 premium;

Young Adult plan;R1 000 Fuel spend;

800 DQ Points two months; 1000 DQ Points four months;

45km of nighttime driving

Dave’s total insurance premium: R 3 407 per month

R 20 442

R 1 470R 840

R 8 200

R 16 400

Premium Cash rewards Excess Funder Account

The Discovery Insure and Vitalitydrive product platform generates unprecedented value for Dave and his family

Premium compared to cumulative rewards in 6 months

Young Adult Rewards Fund


Cash fuel rewards

25% ExcessFunder

Account

10%

47% of Dave’s premiums paid out in cash rewards

R 20 442

R 1 470

R 8 200

R 16 400

Premium Cash rewards Excess Funder Account

The Discovery Insure and Vitalitydrive product platform generates unprecedented value for Dave and his family

Premium compared to cumulative rewards in 6 months

Young Adult Rewards Fund


Cash fuel rewards

Excess Funder Account Booster

84%of Dave’s premiums paid into his Excess Funder Account

100%BOOSTER

SmartQuote from Discovery Insure


1

2

3




Save up to

25%on premiums


1

2 3 4

5

25%

FASTTRACK

SMARTQUOTE

Save up to

25%on premiums

Experience review








Up to 50% of BP fuel spend back

Up to 10% of premium paid into your Excess Funder Account

Up to 25% of car premium paid into Young Adult Rewards Fund

Benefit enhancements in each area of cover

Select clients get up to 25% off their

premiums

FastTrack replaces portable possessions

within 48hours

Digital advice process for Insure

advisers

50%

ExcessFunder

Account

10%

Discovery Insure 2012 Update

Investor Relations

Discovery