Discovery Life's Global Education Protector increases access to tertiary education
While the right to education is indisputable, many challenges persist that prevent access to quality education, particularly at tertiary level. The reality is that it can cost more than R2.2-million to educate a child from crèche through to the end of their tertiary education. With the average South African family having 2.29 children, this means they would need to spend approximately R5 million to educate their children at a private school. These statistics are contextualised by the fact that one in every four children will experience the life-changing event of a parent passing away, or becoming ill or disabled, during their schooling years.
Discovery Life has introduced an innovative insurance product with these growing challenges in saving for education in mind. It not only comprehensively protects a child’s education to the conclusion of tertiary education, but also uses the parent’s health and wellness management to fund up to 100% of their child’s tertiary education, even they don’t claim from their life insurance.
Using health and wellness to help fund tertiary education
Discovery Life’s business model works to address certain societal issues — such as lifestyle-related health conditions — by motivating positive behaviour change and rewarding the improved health of their policyholders. This is achieved through it’s shared-value insurance model, whereby all parties involved benefit from the positive behaviour of its policyholders. By encouraging clients to manage their health and wellness through the Vitality programme, Discovery Life experiences lower claims, fewer withdrawals and an overall healthier insurance book. This results in significant risk savings that provide value, which is then returned to clients. Clients enjoy better value through lower premiums, enhanced benefits and improved health.
Today children begin school at a younger age than before; in total 21 years of education must be paid for by parents, at a cost that runs into millions. (Photos: Weekend Images Inc, PeopleImages and Portra)
This shared-value model resonates globally, as seen with the Discovery-owned UK companies VitalityLife and VitalityHealth, their partnership with Ping An Health in China, and their partnership with AIA in Australia and southeast Asia, to name a few. Globally, Vitality now has more than seven million members, and is growing by over 150 000 members per month. All of these companies have seen the value of using Vitality to improve the health of their clients and pass on the value generated by this back to them.
The aforementioned shared-value model has shown impressive results for Discovery Life; their clients with Gold and Diamond Vitality status now have a life expectancy of 87 — on par with some of the highest life expectancies in the world. One of the ways in which Discovery Life has returned the value generated is through the PayBack benefit, through which they return up to 50% of their clients’ life insurance premiums, based on how well they managed their health and wellness. To date, Discovery Life has paid out over R2.9-billion in premium paybacks.
With the success of their shared-value model, and given the challenges currently facing protecting and funding for education, particularly tertiary education, Discovery Life researchers turned their attention to tailoring a unique shared-value insurance model to help overcome these challenges.
By optimising the shared-value insurance model through long-term rewards tailored to the needs of the individual, Discovery Life has been able to take education protection to the next level. By providing appropriately aligned, long-term rewards that are aligned with parents’ intrinsic motivations to provide for their children’s education, these parents are not just improving their health and wellness behaviour over the short term, but also forming healthy habits over the long term. This creates substantially more risk savings for Discovery Life, over a much longer period of time. The resultant long-term risk savings derived through this optimised shared-value model can then be channelled into a benefit mechanism that not only protects children’s full education against life-changing events, but channels their parents’ improved health and wellness into funding their children’s tertiary tuition fees.
Saving for and protecting education
The importance of both saving for and protecting education is evident, given the current trends in education.
Children are starting school at younger ages
For the average child, parents have to save R5 722 every month from birth to fund the education journey from primary school level. The average child now starts their education journey at crèche level, at the age of 18 months. This means that parents have less time to build up sufficient long-term savings before the commencement of their childs education journey, resulting in them having to save over 20% extra per month. This is a trend witnessed globally: children start school on average one year earlier than a decade ago.
The costs of supplementary education expenses are rising
The above statistics don’t take into account the fact that the cost of supplementary education expenses are increasing. To compete equally in today’s knowledge-based economy, children require resources such as laptops, iPads, tutoring, and sports equipment. An iPad alone can cost R10 000. These additional expenses can increase the total cost of education by more than 50%.
Tuition fee increases are outpacing salary inflation
These rising costs of education need to be viewed in the context that tuition fees are rising faster than salary inflation. According to Statistics South Africa, education inflation has exceeded salary inflation by around 2-4% each year in recent years. This means that, assuming a family is spending around 18% of their income on education-related expenses now, in 18 years’ time they will be spending around 72% of their income on education — a fourfold increase.
Couples are having children at older ages
Another clear trend is that, with the rapid pace of technological advancements, many couples are choosing to have children for the first time at older ages. At Discovery Health Medical Scheme, the average age of first-time mothers is now 30. In the US, the average age of a woman giving birth for the first time was 24 years old, 15 years ago. Today this age has increased by 10% and now sits at over 26. While having children at an older age may allow for a couple to build up more savings before the child is born, it also means that they are likely to have a financially dependent child by the time they reach retirement age. This could result in many individuals having to work longer into retirement or to use their retirement savings to pay for their children’s tertiary education.
Education creates value for all
Despite these costs and the difficulties in funding education, the need to facilitate access to the best possible education is clear. For each additional year of education, a person’s income increases by 10%. A tertiary education can lower a person’s mortality risk by up to 22%, and each additional year of education on average boosts a country’s GDP by a vast 18%.
Yet, with all these benefits, up to 56% of South African households do not have financial protection plans or savings for their children’s education in place. What makes this lack of protection or savings more concerning is that one in every four children will experience the life-changing event of a parent passing away, or becoming ill or disabled, during their schooling years. From Discovery Health Medical Scheme data, as an example, there are on average 30 deaths of a parent within a month after a baby is born.
Alternative sources of education funding are necessary to help overcome challenges
With these statistics in mind, it is clear that parents need to save for and protect their children’s education. While the necessity is there, both saving for and protecting education can become costly for the average family. Moreover, given the rapidly rising costs, the move towards starting education at an earlier age, and the increase in competition requiring a more advanced and costly education, the challenge shifts towards coming up with alternative forms of education financing that draw funding from other, previously unused sources.
From as little as R90 per month, Discovery Life’s innovative Global Education Protector is designed to meet all these challenges by not only protecting policyholders’ children at every stage of their education journey, but also allowing them to get up to 100% of their children’s tertiary education funded, even if they don’t claim, by simply leading a healthier lifestyle. Through this benefit, Discovery Life is already funding the education of more than 4 000 children, ensuring that they can access the education they deserve.
Discovery Life Limited is a registered long-term insurer and an authorised financial services provider. Registration number 1966/003901/06. Product rules, terms and conditions apply.