Financial Services group Discovery has set June 2024 as the date it will exit the UK car insurance market, just three years after launching VitalityCar.
The company in its annual report said it had decided to proceed with the running off of the VitalityCar book by June 30 2024, and refocus its attention in the UK on the health and life-insurance markets.
A spokesperson for the group said VitalityCar was designed to incentivise and reward good driving, and as such offered market-leading value to its members, but market conditions hamstrung its rollout.
“The car insurance market experienced unprecedented claims inflation, leading to significant price increases, which our underwriter had to pass on to our members,” the spokesperson said.
“Critically, these increases materially impacted our ability to deliver appropriate value for good drivers — a cornerstone of our approach. Regrettably, this led to the decision to exit the car insurance market.”
Professional services firm EY in June said the UK motor insurance market experienced its worst performing year in a decade in 2022, with further losses expected in 2023. It said the dire outlook was largely driven by high inflation and premium costs.
EY said it expected that premiums surged 16% (£74 per policy) in 2023, and would increase 11% (£59 per policy) in 2024.
Vitality, in partnership with Covéa Insurance, launched its VitalityCar insurance proposition in the UK in June 2021.
At the time, Discovery estimated the UK motor insurance market to be nine times larger than that of SA.
Discovery said despite its exit from the UK car insurance market, it was on course to building a dominant life- and health-insurance business in the country.
“We remain unwavering in our commitment and focus in the health- and life-insurance markets, where our approach continues to be truly transformational. This positions us strongly to accelerate growth within these markets — and deliver on our ambition of being the UK’s leading next-generation life and health insurer.”
Discovery is also winding down VitalityInvest, a process it said it expects to have concluded by the end of 2023.
When it was launched, VitalityInvest was an attempt to provide additional incentives to investors who made efforts to become and stay healthy.
The Johannesburg-based group said in the annual report that building Discovery Bank into a “composite-maker” in SA was one of its key priorities in future. It said the lender would expand and diversify its product offering and lending suite to attract new segments.
In 2024, the lender will throw its hat into the more than R1.3-trillion home loans ring.
The bank’s home loan proposition, which will come just under five years after its own launch in 2019, will go to market in the first quarter of 2024.
“Discovery SA will focus on scaling Discovery Bank to profit, positioning it as the face of the composite, and ensuring each business is a leader in terms of market share, margin, product, and client value,” group CEO Adrian Gore said in a letter to shareholders.
In its interim results released in September, Discovery said it expected Discovery Bank to achieve operational break-even in the 2024 financial year, and begin being profitable in the outer years.
The fledgling bank, which is registering about a 1,000 customers a day, narrowed its loss to R767m in the year to end-June.
The lender also reported a 49% rise in customers, taking its client base to more than 700,000 and closer to its target of 1-million by 2026. Retail deposits rose 36% to R14.3bn and advances leapt 22% to R5.2bn.
Gore also told shareholders he was happy with how spend on new initiatives had reduced from 18% of normalised operating profit in the prior year to 10.6% in the current year, and close to the group’s guidance of 10%.
“The reduction in spend has tracked that of Discovery Bank, our most significant initiative, as spend remained well within plan despite accelerated client acquisition,” he said.
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