Why should my life insurance payments subsidize those with unhealthy lifestyles?

I am not sure if you have thought about this?

On one level this is absolutely what is happening in the land of personal insurance.  If I have a poor diet, drink too much, never take exercise, skip doctor’s visits and basically neglect my body, my life insurance will generally cost the same, as if I am a plant-based, ninja warrior who founded a seaweed smoothie company.

Insurance companies do go some way to mitigate this difference in risk between the healthy and unhealthy among us. For example, smokers always have a higher premium than non-smokers, and for obvious reasons we all know – smoking has strong correlations with lung cancer. They will also factor in things like your Body Mass Index (aka. BMI, which is a person’s weight in kilograms divided by the square of height in metres. A high BMI can indicate high body fatness, which comes with a raft of other health risks.) If your BMI is outside “normal” at the time of application, the insurers will charge a higher premium. Furthermore, if you have had life events that are likely to shorten your life (such as stroke, heart attacks, mountain biking accidents, etc) they will either charge you more, or “exclude” paying out if those certain things kill you.

However, that aside, once the insurance policy is in place, there is no financial benefit for me living a healthy lifestyle or choosing to convert to one if I have let my health lapse a bit.

But wait! One NZ insurance company has launched a new incentive to address this very issue, and our clients and staff have been enjoying the benefits on offer.  

The insurance company is AIA. They have introduced a program called  AIA Vitality. You may have seen it advertised on the telly with ambassadors Ian Jones and Dame Valerie Adams.  

In short, when you do healthy things and record them in the app, you earn points, which you can choose to covert into discounted insurance premiums and other rewards, like Apple Watches and AirPoints.

Given that I not only have life insurance, but that I also advise others on this stuff, I thought I would give the AIA Vitality scheme a test run (pardon the pun).

Note: Yes, you do have to have AIA insurance to be part of Vitality.  Although this is an interesting benefit, and we have had some clients put their cover to AIA because of this benefit, it is only one factor we consider when recommending which company is best for your specific situation.

What did I get out of it?

• When I signed up, I straight away received a 10% discount on my insurance premiums, and this year received another 2% (due to my activity) so I received a 12% discount.  This will increase up to 20% if I keep engaging. Given I spend around $800/month at AIA, this saved me $1152p.a. last year, and could save me up to $1920 in time.
• I then received 260 Air NZ air points.
• I bought a new Garmin watch and got a 25% discount - so another $400.
• I got a 40% discount ($100) on a Mole map check.

There are other rewards and discounts that I didn’t receive or wasn’t interested in.  A wee plug for the gym bunnies - there is a good Les Mills gym discount - so check that out if you are interested.

What did it cost me?

• $11.50/month ($138/year)
• I spent around $150 on the Mole Map check
• I clearly spent too much on my new Garmin watch -but I LOVE IT!
• A little bit of time doing the online surveys and getting a health check done

What I needed to do to get these rewards

• I had to track my exercise (steps or training sessions)
• I got a mole map check done (that I had been meaning to have done for years)
• I entered a couple of running events I got points for
• I got a flu and Covid vaccinations I got points for
• I did some online self-assessments I got points for  
• I got a quick (free) health check at a chemist -and got extra points because I was in a normal range for blood pressure/cholesterol, etc

That activity was enough to get me into the “platinum band” There were other things I could have done, on top of the above (dental/eye checks/sleep tracking, mediation, etc). I might add those in as time goes on.

So, overall, my experience has thus far been a positive one.  

If you want to reduce your insurance premiums and could use some incentive to look after yourself, I recommend AIA Vitality to you as an option.  

Lots of us are doing some or all the activity that is rewarded through AIA Vitality, so it doesn’t necessarily mean a whole lot of effort.  My experience is you do need to stay engaged though, and if you don’t keep recording activity you are likely not to hit your goals and get the most out of the reward scheme as possible.

If you want to learn more, do jump on to the AIA website, or ask your Velocity Financial Adviser.

Brendon.

‍

‍

Brendon Ojala (FSP119244) is a Financial Adviser with Velocity Financial (FSP95466). No investment decision should be taken based on the information in this blog alone. Please see Brendon’s disclosure statement on our website.

About Brendon:

Hi, I'm Brendon, one of the owners and advisers at Velocity Financial. I have been giving advice on mortgages and insurances at Velocity for around 15 years, and it is great to be able to work with people to achieve their financial goals. Prior to giving money advice I worked as a youth worker and managed teams for a not for profit organisation. I live with my wife and one of my sons (the other one only stays when he needs food) in Berhampore, and if I'm not talking revolving credit accounts I can be found running the trails of Wellington.

‍