The four things we learnt at this year’s Global Health Insurance Conference
There’s a crisis in healthcare insurance in which traditional players face being squeezed out by large tech-savvy players entering the market and cozying up to providers. But there are also opportunities for insurers willing to embrace change quickly. Healthcare Nova was at the 9th Global Health Insurance Conference in Amsterdam at the end of last month talking to delegates to find out more. These are the four key things we took away.
1. Insurers must shift from payer to player
The traditional insurance model is dying, if not already dead. As Wouter van Leeuwen, partner and MD of Netherlands-based management consultants Boston Consulting Group puts it, insurers must embrace the move “from health payor to player”.
The risk, as industry stalwart Ron Buchan, former CEO of Allianz Worldwide Care explains succinctly, is that “the insurance market as it is currently structured will be squeezed out by the providers developing close technological links with the Amazons and Microsofts, and the provision of funds to pay for that healthcare will be the logical consequence of that marriage”. Insurers, he adds, unless they change their business models fundamentally, “will find there’s no role for them to play”.
But there is an opportunity to change by embracing technology – and Buchan is clear insurers need to ask at every turn which of these do we want to become involved with, and how does this affect our business model?
- Artificial intelligence and machine learning – which is also relevant to cybersecurity and underwriting claims.
- Wearables – and hearables, attachable cameras, smartwatches, even swallowables. A third of these units in 2021 will be sold in China.
- Mobile health – a conservative estimate suggests worldwide telehealth revenues by 2021 will increase by upwards of 30% by 2021.
- Telehealth – including the ability to transmit real time data from the body, with AI-driven algorithms
- Blockchain – a series of encrypted vaults where info is kept in a discrete unit. It’s interconnected and secure, a very good way of storing medical records, as proof against cyber attack, and ensures a lot of insurance contracts become a lot easier to administer and provide payment support for.
You don’t have to look far to see examples of vertical integration – take UnitedHealth’s LatAm experiment, which most recently saw them in a 2.8bn deal for integrated payor-provider Banmedica in Chilé, or read here how French insurers are moving into services. And you can see here how Axa and Aetna are entering into JVs and building networks.
2. Insurers need to be steering the ship
Insurers need to be part of the big picture – perhaps even steering the ship. As van Leeuwen puts it: “The traditional role of may health insurers is to pay for care and to reimburse. If you look a the total costs you manage as a health insurer 90% plus is healthcare cost and only five to 10% is admin so you can be super lean with trimming admin, but the real impact will be felt tackling the bigger number.
“The leading health insurers are shifting their role from payer to player. They are becoming the orchestrators of the healthcare system and striving for value.”
Buchan shares this view: “The day of the health insurer has gone. The day of the health manager – which is how I suggest health insurance should be moving – is dawning.”
Key to this is that insurers already have their clients’ ear. They have the foundations of a relationship. The insurer needs to put itself at the heart of the new model healthcare system. It needs to:
- Maximise that client contact and leveraging that relationship
- Facilitate and incentivise that contact
- Personalise contracts in a world where one size no longer fits all
- Take charge of how and where members go for treatment
- Help members to look after their own health – and reward them for so doing
The insured client just five years hence will walk a very different digital path to the consumer of today. Nicholas Roubin, Head of business development (Europe) at Now Health International explains here that these technologies are creating a seismic shift in the way insurance operators conduct business and redefining what it is to be an insurance company.
3. Insurers must help members take responsibility for their own health
But how? You tell them how (un) healthy they are, give them the information they need, and help and / or bribe them to fitness.
Helping people to help themselves – prevention not just treatment – is a core function of the new business model for insurers.
Robin Ali, head of practice at The Consiglient Consultancy in Dubai, is a great believer in providing information and support: “You can’t expect the member to take responsibility if they don’t understand the process. The only thing a member has responsibility for is reasonable utilisation patterns, which requires education and knowledge, and staying healthy or managing their condition.
“Use the data you have to identify the high cost users, understand why they are high cost users and develop information and education programmes appropriate to that specific user or segment, target segments in communications – not just blanket communications – not all diabetic patients need the same information – and monitor the outcomes over time.
Members also need the right incentives to stay healthy. Health scoring company dacadoo uses 70 algorithms to calculate members health in real time integrating EMR, lifestyle, and devices there’s even an in-built gaming system. Members are incentivised to stay health with rewards. Peter Ohnemus, president and CEO of dacadoo, explains: “We’ve sold about a billion car navigation systems over the last 10 years. I tell you 2bn lifestyle navigation systems will be sold over the next 10.”
Keith Klintworth from Vitality is doing something similar. He explains: “One of the challenges most health insurers face is they only interact with their customers when you are sick. It’ a grusge purchase. You’re healthy, you pay a premium, you lapse, you try to reenter when you’re sick but you can’t.
“You need to create lifetime value and give them something not just when they are sick. You need not only to attract the gym bunnies but also to give cover to the sick, and the group in between.
“Profit comes out of duration. You have to increase the duration on policy.”
With these technologies comes automation. The next time you chat with an advisor on a medical app, are you sure there’s a person behind the responses on your screen, and not a smart AI? Ohnemus says: “You can take out 30-40% of any insurance company tomorrow by making it automated”.
4. Insurers must recognise the challenge from the big tech players
They new insurance business models are increasingly reliant on tech – and the new and powerful tech players may be further down the path of embracing that technology. Blunt-speaking self-confessed tech-head Ohnemus is asking insurers to consider their future – and whether they have one.
He says insurance companies, which once led the way when it came to harnessing top tech, have fallen behind: “It’s been too easy to make money with a fixed income market. This is going to change very, very, very rapidly. According to McKinsey, in three years at least 30% of all insurance companies will be in serious trouble because they are going to get competition they have never seen before.”
Those new players include Microsoft, currently hitting the headlines by launching a new healthcare division based on artificial intelligence software. It’s already planning monitoring systems and large scale studies into conditions like diabetes.
And unlike previous pretenders to the insurers’ throne, these players have cash to splash or as Buchan puts it: “The great barrier to entry in our market, which as insurers was our capital base, is no longer a barrier. Do you know how much money Microsoft, Google or Amazon have?”
The new world order will see traditional players, the large insurance companies, jostling for position with clinicians / providers and tech companies (perhaps in league with each other) in an increasingly crowded market.
Ohnemus adds “Insurance companies have zero digital strategy and because of the long fixed incomes [this has] kept on funding the unhealthy life and health insurance industry.”
This must change.
Looking to the future
Ohnemus’ assessment is bleak: ““Your business is sick. Most of you have sold your business to agents. You have no idea what is going on. You need to get the relationship back with the client. It’s the something for something economy [built on] the personal relationship. Whoever doesn’t believe that will be unemployed.”
But Buchan takes a more measured, positive view, explaining: “Looking at how insurers operate, if we embrace the opportunities to be involved in any one processes like well-being, diagnosis, treatment, home-care, and we act in some way as an enabler, as a manager as we will have contact with our client base and we can position ourselves as the one common denominator where we can provide access to care from common record bases – if we can become adventurous and do that obviously we will reduce cost, but more to the point we will survive.”
And if not? He answers: “We won’t. Our business hasn’t changed since 1775 now it will change every 4 years.The future is exciting. It could be very successful, but we have to dramatically change the way we do things.”
We would welcome your thoughts on this story. Email your views to Claude Risner or call 0207 183 3779.
