Insurers have historically tried to mitigate their structural digital disadvantage with health & wellness features borrowed from the consumer health world. Facing 7 fundamental challenges, their efforts were met with limited results despite valuable learnings. Insurers are now searching for solutions that intertwine insurance and healthtech in a more compelling value proposition for policyholders, employers, brokers, and healthcare professionals.
With profitability and regulatory pressures increasing due to chronic and long-term diseases, health & life (re)insurers around the world are testing new business models, solutions and go-to-market. To support their efforts, healthtech must be grounded with pharmaco-economic evidence and ready to accept performance-based compensation.
Mobile health is not a digital rider
It is obvious to users and insurers alike: insurance services are not products that one purchases, nor interacts with, every day or week. What might not be obvious is that mobile applications, to remain installed, understood and top-of-mind of users, must be used on a daily basis, weekly at the very least, ideally several times a day. There is therefore a structural disadvantage for traditional insurance products to succeed in the mobile app realm.
When mobile health solutions (digital companion, digital therapeutics, wellness app) appeared, they sounded like the Holy Grail:
- They are, by design, applications that must be used on a daily/weekly basis;
- They could provide a benefit to marketing and underwriting teams who could leverage user data and digital IDs to better segment and price customers;
- They could be presented as virtuous features that improve patients' health, in turn, helping premiums stay low.
Quickly, insurance digital teams asked for consumer health startups to embed these features to improve patient digital engagement and branding.
While doing so, they made 7 assumptions that undermined the success of insurers in their digital health ventures:
- Digital-only health apps work • Insurers assumed that digital-only health and wellness applications had good retention and stickiness metrics: with 95% churn at day 30 and stickiness below 10% (source: AppsFlyer), they are not the digital silver bullet they may have been sold as. Without human intervention (proactive coaching, interconnection with healthcare practitioners), acquisition, retention and usage are abysmal for mobile health application;
- Core = center • Insurers kept the core insurance features at the front and center of their application, putting digital health as an add-on feature: while one can understand the appeal to be the center of the conversation, users don’t wake up everyday thinking about health/life insurance. Insurers had to find a way to power health applications without trying to be at the center;
- Healthcare cares • Insurance apps didn’t pursue any clinical validation for HealthCare Professionals (HCPs) to confirm their medical relevance: a claim submission+cross-sell+step-counting app does not stand a single chance to be considered seriously by a healthcare professional. Pursuing hard to obtain medical certifications is necessary to gain HCPs support who are the main influencer to patient behaviour;
- Force-fitness • Insurers pursued digital health solutions that could cater to all their policyholders at once: they selected vanila wellness solutions that competed with better funded global startups who vie to create the best UX/UI, providing no meaningful differentiator (e.g. step counter, wheels of life, symptom checker, telemedicine, articles…). Cracking a therapeutic area requires absolute focus: think about searching for a medicine that cures one disease vs. searching for one that cures them all and now try to distribute it at the tax office in lieu of a pharmacy;
- Trust in me • Insurers hoped users will trust them with their health data, despite the well known distrust and opposite interest between policyholders and insurers. Medical applications offer a trusted middleman that reassures and protects both users and insurers alike;
- Show me the money • Most digital health applications didn't go through rigorous pharmaco-economic studies to demonstrate their health claims reduction impact, reducing their value proposition as a marketing gimmick. If such a study is not yet available, Insurance / Healthtech collaboration should start - without bureaucratic delay - with a pilot to build real-world evidence.
- Build it and they will come • Many insurers assumed - or at least pretended - that they had sufficiently good customer relationships to distribute digital products at minimal costs. It is now established that most insurers don’t have digital access to their own policyholders. Digital roll-out requires always-on marketing and insurance agent involvement from the underwriting.
While a few digital teams are still pushing legacy solutions on their last trusting subsidiaries, most insurers are searching for solutions and partners able to avoid the above pitfalls.
Health trends and digital health innovation
Early short-coming could have stalled innovation if 6 underlying trends had put pressure on life & health insurers to keep innovating.
- Chronic diseases (CD) prevalence • Rising with aging population and developing countries, 60% of adult population has one (and 40% of two or more) chronic disease(s) such as hypertension (25%), dislipidemia (30%), type-2 diabetes (10%), mental disorders (18%), respiratory diseases (10%), cancer (5%). Excluding patients with chronic conditions is becoming impractical.
- Chronic diseases economics • These diseases represent 35% of total direct health care costs and are responsible for 70% of premature death. Life and Health insurance profitability increasingly depend on the insurer's ability to deal with prevention, early detection, and management of CDs.
- Regulators pressure • the direct and indirect (productivity) costs of chronic diseases to public health and the overall economy (estimated to ~20% of the GDP), regulators are increasingly requesting private insurers to cover (pre-existing) chronic conditions.
- Value-based healthcare • Clinical impact alone is becoming insufficient to get reimbursed. Payers, public and private, are increasingly requesting economic evidence that a treatment is more cost-efficient than existing solutions.
- Delay in awareness and adherence • Chronic diseases start in your 30s, are usually detected in the late 40s, and patients start being adherent in the mid 60s. The delay in awareness and adherence is the last frontier to tackle through behavioral modification.
- Digital therapeutics • Digital health solutions are now getting vetted using clinical studies to support their medical and marketing claims. These solutions, once clinically proven, can register as digital therapeutics (DTx) with the DTX Alliance.
The paths forward
We can already observe the attributes of successful digital health / insurance solutions.
In terms of value proposition,
- Reducing long-term risks and thus improving insurer margin is the first value proposition that digital health solution should be able to demonstrate to insurers;
- Similarly, reducing employers’ health premium is a similar value proposition for digital health solutions (in)directly paid by employers;
- Finally, retention, health insurers with access to patient behavioral data may provide a more competitive pricing that other insurers, deprived from that data, may be able to offer.
In terms of solution design,
- Clinical research published in peer-reviewed medical publications should become a requirement to
- Performance-based pricing should be a strong component to digital solutions (a pure marketing cost does not align incentives).
- New insurance products intertwined with self-monitoring and behavioural tracking are being tested: incentive-based (lower premium at renewal, lower co-payment within the year, cash-back) or penalty-based model (higher co-payment during the year, reverse cash-back). These are commonly referred to as Behaviour-based dynamic pricing (BBdP).
In terms of Go-To-Market,
- Proof of concept should establish economic evidence and measurement methodologies to ensure integrity and trust on both sides. Considering the humble level of resources of startups, it may be recommendable for insurers to cover the incremental costs associated to the POC (i.e. no software costs but people or special integration)
- Agents and brokers should be incentivized to ensure patients onboarding both in volume and quality (7/14/30 day churn vs. top performing peers)
- Employers, considering the importance of corporate health plans, are the most interested parties as they benefit from and play a key role in onboarding and retention.
To discover real-life examples of these shifts and explore opportunities, we invite (re)insurers to get in touch with Elfie, a global health company who specializes in reducing chronic diseases burden for patients, healthcare organizations, and payers.