Health insurers are uniquely positioned in the healthcare ecosystem to influence clinical outcomes of members with chronic diseases
Health insurers play a unique role in the patient journey as they often define where, how and when their members receive medical care and how the care is paid for. However, so far the traditional insurance process brings the members in contact with the insurer only at the time of entry into the ecosystem i.e underwriting and during the event of an illness or claim. Multiple concurrent trends like rising burden of preventable chronic diseases, an ageing population and adverse selection of chronically ill members have added to an increase in the cost of care for insurers.
Reeling under constant pressure of rising cost of care from preventable chronic diseases, insurers end up spending almost 60-70% of their total premiums on claims pertaining to diseases like diabetes. As they realize the importance of patient’s health behaviour and a less talked about constant i.e a lack of engagement of chronically ill patients with their therapy, many insurers around the world have been compelled to look for tools that aid in improving the health of existing members with chronic diseases.
By partnering with digital health providers of complementary capabilities and offering support to members during the entire patient journey, insurers can potentially reduce the cost of future claims. Maturity and ubiquitous availability of digital health technology like mobile based applications and wearables often backed with artificial intelligence have made it possible for many insurers to collaborate with technology companies to offer innovative insurance products with scalable digital health programs. Such insurers have not only been able to attract & reward healthy members but also manage their costs of claims from high-risk members.
For example, Vitality, a flagship product of Discovery Limited, a South Africa based insurer, offers rewards for getting healthier. Since it came into existence, the program has now evolved into a complete wellness system that tracks everything from physical activity to nutrition over the course of a member’s life. The model has demonstrated shared value for the insurer as well as policyholders. Their data for health insurance speaks for itself[i]. With this product, the company has experienced:
- 44% increase in market share
- Initial engagers: 28% lower hospital costs, 10% lower chronic conditions
- Members who run at least 2 times per week save 15% on healthcare costs
- >3.6x lower lapse rates
- 4% lower loss ratio
Vitality has also collaborated with many Asian insurers such as Manulife[ii] and AIA[iii] to implement shared value insurance and engage with their members by providing wearables, rewards and incentives programs to encourage them to pursue healthy lifestyles.
Insurance in India is at a point of inflection but insurers are not yet leveraging their unique position in the healthcare ecosystem
Ever since the first Mediclaim policy was launched in 1986, incorporation of Insurance Regulatory and Development Authority of India (IRDAI) as a statutory body and liberalization of the sector for foreign investments in the year 2000, India’s insurance sector has undergone a great degree of evolution. The stand-alone health insurers have also experienced an average growth rate of 35% per annum in the past few years.[iv] The IRDAI has also taken some initiatives to promote healthy behaviour amongst members and product innovation with the use of digital health technology. These initiatives are reactionary to newer trends in healthcare that are driving the demand for health insurance and the conviction that technology can help insurers assess risks better.
With the rising number of smartphone users and growing internet penetration in India, and changing expectations and aspirations of customers, the insurance sector in India is also on the road to adoption of technology and undergoing a major digital transformation. Some important milestones of the last five years are:
- Health Insurance Regulations 2016: Focus on member wellness and preventive health. It encourages insurers to incentivize the members demonstrating healthy behaviours.
- Report of Committee on Regulatory Sandbox in the insurance sector in India: Recommended setting up a regulatory sandbox to provide a flexible control environment to pilot insurtech projects, collect real market data & user feedback. Amongst many other use cases of insurtech, it also focused on leveraging digital health solutions for better management of risk, encouraging innovative underwriting and pricing models like pay-as-you-live. Use of wearable devices for members was approved for two insurers under the regulatory sandbox in June’20, and applications for the second cohort were invited in Aug’20.[v]
Despite the gains made, the sector still faces considerable issues. The overall insurance penetration in India is still low, at 3.7 % of the gross domestic product (GDP) as against 6.31% of world average.[vi] The IRDAI annual report of 2018 states that net incurred claims ratio of group business in health insurance has remained between 102% to 125% since the last five years consecutively. This is a worrisome trend for insurers considering that group business (excl. government business) contributes to almost 50% of the insurer’s total premium.[vii]
Partnering right to deliver interventions to hard-to-reach patients with innovative low-cost, digital models of delivery in resource constrained geographies
Across the patient journey, there may be multiple opportunities where insurers can mobilise coherent digital strategies with different stakeholders like:
- Member health education and engagement
- Screening and diagnosis
- Access to care
- Disease management
However, insurers will need to focus on their objectives for each partnership. Just providing wearables to track metrics like physical activity or meals taken, may not affect the outcomes positively. What is required is a real-time intervention and personalized life-balance coaching to help patients with chronic conditions like diabetes cope with their day-to-day struggles related to maintaining a healthy lifestyle, blood sugar levels and motivate sustainable behavior change . It makes sense for insurers to partner with digital health companies for offering such services as such partnerships enable insurers to make value driven offerings available to their members without having to make significant investments in building in-house capabilities.
By partnering with digital health companies along the health ecosystem insurers can:
- Create a seamless user experience across various steps of patient journey
- Integrate complementary services with core insurance products
- Leverage data and analytics across services to improvise price, underwriting and product experience of the members for higher retention
While insurers have the unique ability to provide scale and access to a captive population of members, digital health companies offer services and capabilities that can allow insurers to focus on their own core competencies, a win-win “patient-centric” partnership for all stakeholders.