Is connected health insurance the winning bet for both customers and insurers?
Health has always been a matter of public concern and it is up to each country to establish how to better organize its healthcare system so as to be able to guarantee the safety of citizens. Healthcare and health plans have actually become the central issue in the US nowadays as Obamacare, President Barack Obama's healthcare reforms dating back from 2010, is going to have to battle for its position with the Better Care Reconciliation Act, which has been put forward by the Republicans. This shows the major role that health plays in politics, for insurers, for citizens and other stakeholders.
Connected Health is a trend that might play a major role in shaping the future of healthcare and of health insurance. In order to better understand the concept, let me give a definition of the more generic term “Connected Insurance”- which is any insurance solution based on sensors for collecting data on the state of an insured risk and of telematics for remote transmission and management of the data collected; it offers a great capacity to register, deposit and analyze data that comes from the users themselves giving the insurer never seen before insight into actual behaviors and lifestyles. “Connected insurance” is about connecting insurance with people and their risks: reach and engage with them in an efficient way and at the same time connect their risks with the insurance cover they take. Insurers have to create new customer experiences, not just insurance contracts, which, for the clients may have little meaning. These concepts apply to several industries like Home, Car, Commercial and of course to the Health sector that is the central point of this article.
In creating a solid relationship with the client, even in health insurance everything should start from customers: listen and understand them (their emotions and needs) and enhance frequent engagement with many touch points, including digital ones. The first step is to understand customer needs, then design new customer journeys based on ecosystems of services and leverage on new available technologies to meet desired needs. Insurers must be able to bring added value for customers and foster high engagement.
If creating partnerships in order to get more specialized is something that many insurers do nowadays, things are not so great when it comes to big data analytics and creating efficient customer experiences. There is so much space for innovation that one might stop and think of reasons why the industry is so slow in adopting such approaches that clearly can have a positive impact on the insurance value chain. Also there are significant differences in the speed with which connected insurance solutions are spreading in the various sectors, with connected car insurance leading the “connected” market at this point in time. Legacy systems are certainly not helpful when designing new and innovative solutions for the market, nevertheless health insurance is a more delicate field that will probably face more obstacles to tackle on the road towards a connected insurance future.
Innovation in health insurance should aim to transform the insurance company from a simple Payer to a proactive Player in the customer health journey. The industry has to take a step backward in the customer journey passing from a “cure” to a “care” approach. Insurance covers can be differentiated by client segments and the insurer can propose different levels of assistance based on specific tools & services. Typical examples of health services are:
- Medical contents in multiple formats;
- Call center for emergencies;
- Pharmaceutical products ordering and home-delivery;
- E-health with specific devices for specific target patients (elder, heart problems and diabetes patients, ...), including alerting on possible critical health conditions.
Furthermore professional medical advices can be delivered in multiple ways (messaging, call, video). Discounted prices for doctors and medical structures can be proposed through a preferred network, while having the option of doing bookings and payments online. Another plus is to have one’s complete medical history storage in a digital format so as to allow easy access to medical doctors and clinics in case of need.
With the objective to push through the adoption of healthier behavior and raise engagement, there are valid solutions: gamification based on wearables and tailor-made goals, wellness content in multiple formats and agreements with gyms, shops and other types of service providers.
Source: Connected Insurance Observatory
Connected insurance in the health sector is affecting the whole insurance value chain and generating real value for the insurance P&L. According to Matteo Carbone, founder of the Connected Insurance Observatory and one of the top worldwide insurtech thoughts leaders, five main value creation levers emerge:
· Risk selection;
· Risk based pricing;
· Value added services;
· Loss control;
· Loyalty and behavior “steering” programs.
Risk selection refers to how connected devices can be directly or indirectly used to select risks at an underwriting stage.
Data collection, limited to undertaking phase, can have a direct positive impact on the overall quality of the underwriting process, allowing price adjustments or covenants. Devices can measure client behavior and collect data to customize covers and propose prices or discounts based on a one to one approach instead of a traditional approach based on averages.
The ability to monitor the "quantity" and "level" of risk exposure is now possible. This can help calculate the risk based on the information gathered, having direct impact on pricing applied to the single customer.
Value added services are actually services related to the insurance policy that have a double aim: on the one hand to guide clients towards desired behavior, on the other hand to offer perceived value through services to clients. Some ancillary services are proposed to the insured clients in order to exploit relevant data detected; these services could be directly supplied by the insurance company or by means of an ecosystem of specialized partners.
Connected insurance can enable the development of a more efficient and faster claims management processes that allows the Insurer to be more present and proactively and make the whole process faster and more efficient, this limiting the portfolio loss ratio.
Behavior programs are basically approaches that use information gathered on the behavior of clients to direct them towards less risky solutions. To this scope a good reward system that stimulates safer client behavior is a key and programs based on innovative gamification approaches are a must in order to keep clients engaged.
Source: Connected Insurance Observatory
Experts estimate a huge potential reduction in loss ratio on medical reimbursement by implementing this innovative approach in health insurance. Starting from the current health losses on an average traditional portfolio, best practices show a potential saving of 20% driving the choices of the insured within preferred networks of doctors and medical structures; the use of m-health tools can help to lower claim costs by an additional 10% while the implementation of loyalty and behavior “steering” can contribute to a further 15%. Finally, predictive and preventive alerts can potentially play a huge role in this context but nowadays it has still to be proven by facts. In synthesis, a reduction in loss ratio of around 50% seems to be achievable with a consistent and intelligent approach in the implementation of these value creation levers.
The objective of insurance companies should be that of gradually moving from their traditional positioning as health insurer of an ill person (playing the role of claims manager and expense payer) towards that of a 360 degrees health counselor aiming to insure lower risk and healthier customers with a customer centric tailor-made approach. So to answer the question “Is Connected Health Insurance any good?” I would say definitely because it is a win-win situation for both insurer and insured. The first one gets to improve and optimize its internal processes and costs while the latter is incentivized to live a healthier life while at the same time getting rewarded for it.
The article was originally published on the author's Linkedin page.