Many readers may be aware of John Hancock’s Vitality Program. I’m not going to attempt to do the program justice but you can click here to read about it. The short story is that the program offers different levels of discounts on your clients’ life insurance premiums based on their healthy lifestyle as measured by a variety of metrics and activities. It also incorporates discounts from partner companies and allows your clients to earn a steep discount on an Apple Watch or a complimentary Fitbit to track healthy activities.
Agents and consumers are taking advantage of it, and it’s billed as revolutionary in the industry. I can get behind the program and support those who qualify and will keep up with the requirements to maintain the discounts.
You knew there was a "however" coming, didn’t you? I specialize in an industry that seems to have a knack over the years for too often disappointing clients. Some of this is due to a multi-decade slide in the interest rate markets, which isn’t the industry’s fault, it’s so much more than that.
The life insurance industry is reasonably innovative and regularly coming up with new marketing initiatives. There’s nothing wrong with that. It does seem, though, that every new great idea can be used rightly or wrongly and is used both ways every time. I’m not for a moment questioning the appropriateness of John Hancock rolling out this program. It’s likely a competitive edge for them; consumers can financially benefit, and if this win/win promotes a healthy lifestyle, that’s all the better.
Don’t Oversell Strategy
What worries me is the opportunity to oversell this strategy, especially to people who may not be apt to follow through from year to year on the activities required to maintain the discounts. This wouldn’t be Hancock’s fault, but advisors should be aware of this.
I was recently working with an attorney on a situation in which the client was putting a six-figure annual premium into a life insurance policy for tens of millions of death benefit. The reasons the agent was recommending John Hancock don’t matter for the purpose of this conversation but it wasn’t because of the Vitality Program. In fact, the agent didn’t originally illustrate the Vitality discount.
One of the reasons I was hired for this engagement to be the devil’s advocate. I explained the discount program to the attorney and asked, given his familiarity with the clients, how likely it would be that they would follow the program and take the steps to continue the pricing as presented. His answer was an immediate and sure, “Almost no chance of that happening, Bill.”
We then precisely recreated the ledger on our Hancock software. When we removed the Vitality discount, the premium wouldn’t hold the contract as structured. My independent modeling and stress testing indicated the policy wasn’t originally built appropriately and had very little chance of sustaining with the discount, increasing the chances of everything falling apart. It may be better to look at this benefit as a performance booster to an otherwise responsibly structured contract rather than a discount for competitive purposes. The consuming public simply can’t get it through their collective skulls that life insurance generally isn’t a transaction for which the goal should be to pay the least amount possible. They never will as long as the sales aspect of the market perpetuates the myth. Price and cost are two very different metrics and are too often conflated.
To reiterate, I’m not criticizing this program. I’m only offering a tale of caution. We all know we have clients who’ll be able to stay with the program and clients who’ll have almost no chance of doing so. I’m in the business of removing hurdles from the path to success. I’m afraid that in some cases, this will add a hurdle. Include that in the T-chart when helping them make decisions.