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New models for digital distribution of health insurance in a post-pandemic world

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  • Drawing on frameworks identified by Oliver Wyman and Accenture we present a framework for distribution of health insurance in a digital world
  • Insurers are increasingly looking at partnerships as a solution to integrate their services into ecosystems and improve customer experience
  • Insurers are looking to have interventions with customers long before a claim is made, and offering services that integrate into a customer’s lifestyle
  • Digital channels remove the underused and often excessive features of traditional products to allow customisation for the individual

The nature of health insurance is changing. The old-style reimbursement of expenses is shifting towards more flexible and customised digital services. These offer greater flexibility and choice, and cost transparency for customers. They also provide insurers with data, contact, and opportunity – the building blocks of digital transformation.

Already consumers are accepting the possibility of remote treatment by healthcare professionals. This report looks at these shifting consumer attitudes towards healthcare, the impact of COVID-19 on health insurance, and how digital distribution is changing the delivery of medical services and insurance.

The world is changing

Health systems across the world are under severe pressure. But consumers have accepted the possibility of remote treatment by healthcare professionals. An Oliver Wyman survey from 2019 showed that 35% of US respondents would accept telephone based health services, an increase of 12% on the 2015 survey, see image 1 below. Almost half (45%) would trust their primary care physician to monitor their health through wearable tech, while nearly two thirds (63%) were willing to share personal health information to improve the quality of their health care.

These trends are repeated in Asia and the digital health ecosystem has grown rapidly. The pace of change – and level of funding for InsurTech in the region – is forcing healthcare incumbents to consider their future as non-conventional methods of healthcare are deployed. These include virtual, home based and symptom checkers/digital doctors that use simple machine learning and artificial intelligence (AI).

COVID-19 as a catalyst for change

The coronavirus pandemic has had a huge impact on the healthcare sector. Consumers have had to cut costs as incomes were affected by lockdowns and furlough schemes. Yet the value of healthcare and life insurance has increased in the eyes of consumers, many of whom would sacrifice lifestyle spending before cancelling their policies. Not only for the treatment of illness, but the reassurance of symptom checking at times when traditional health practitioners were unavailable.

In any case, change must come as the old reimbursement model is no longer suitable. It has all the disadvantages of traditional insurance – inflexibility, a lack of transparency, and little opportunities to engage with customers. Today, insurers are looking to reverse that through interventions long before a claim is made and offering services that integrate into a customer’s lifestyle.

Better fit and fit for purpose

Digital channels remove the underused and often excessive features of traditional products to allow customisation for the individual. This is essential for both sides of the relationship. Customers have much higher expectations as consumers and crave tailored services. Tailoring improves market data and allows the insurer to price more effectively, because by monitoring the health of individuals and offering suggestions to improve behaviour, risk will be reduced.

Manulife and AIA have adopted strategies that offer rewards and incentives to customers who use wearable tech. But the new model also places patients with the right practitioner, improving their treatment, and therefore their experience as a customer. Oliver Wyman highlights Prudential partnering with Babylon Health in the UK to offer AI based symptom checking across Asia in its report on Digital Partnerships for Health Insurance. Bupa, Ping An and others offer telemedicine services around the clock. And AXA has a partnership with Jaga-Me to provide on demand post-hospitalisation nursing care in the home in as little as two hours. See exhibit 1 from Oliver Wyman below.

New ways of doing business

Insurers are increasingly looking at partnerships to integrate their services into the ecosystem and improve customer experience. A recent report from Accenture is clear that traditional channels are putting profits at risk at incumbents, by as much as 25%.

The Accenture report identifies five emerging distribution models:

1) Virtual insurance advisor

This creates an Amazon-like shopping experience that’s both transparent and personalised. Its data driven and web-based and makes the process of buying and reviewing insurance easy. The report suggests as many as 74% of customers would accept insurance advice generated by a computer.

The development of the omni-channel adviser is covered in more depth in TDI’s whitepaper POV report Agency alarm bells ringing as consumer adoption of digital accelerates beyond tipping point

An example of a company following this route in China is Xiaobang (see table below for more).

2) Everyday risk coach

This leverages data generated by the internet of things (IoT) to provide more granular data about the daily behaviour of customers. Individual risk profiles are generated from data from devices, allowing insurers to offer holistic risk advice to their customers. More than half (56%) say that personalised advice to help them reduce their risk of loss or injury is valuable to them. Vitality’s partnership with John Hancock in the United States, Generali in Europe and Ping An in China each encourage healthier lifestyles through data gathered from wearable tech.

The best customers for health insurance are those that want to stay healthy. Increasingly, digital tools are also available to help those managing chronic illness, such as diabetes (types 1 and 2), blood pressure and so on. Those who modify their behaviour or maintain good behaviour receive the greatest rewards. Dnurse is a good example of an everyday risk coach operating in the Chinese market.

3) Plug and play

Insurance need not be purchased from an insurer at all but via a point-of-sale opportunity at another retailer. As many as 40% of customers would buy insurance from a car dealer, while 30% might buy it from a retailer or supermarket. Almost as many (29%) would consider online providers. This approach allows insurers to partner with social platforms, travel sites, household and small business retailers and gain access to a new customer group through point-of-sale options. Chubb’s partnership with Suning gave it access to Chinese online retailers’ 230 million customers via its ecommerce customer network. But in the healthcare market, Zhong An and Wukongbao represent the plug and play strategy.

4) Ecosystem orchestrator

Unlike the plug and play option, this player owns – or controls a significant portion of – an insurance ecosystem. It draws together data from partnerships with financial services entities, home services and wellness providers. It will allow insurers to create highly customised holistic ecosystems for customers.

Google plans to launch Bharat Saves for the Indian subcontinent, that could become an ecosystem for all types of financial transactions, including insurance and wealth planning. The demand already exists. Three quarters (76%) of consumers would like to be helped to live safely and for longer in their own homes. In China we see this with WeDoctor attempting to be all things to all citizens in the healthcare space.

5) P2P network operator

Insurance is very familiar with mutuals and the proliferation of data is creating new ways to identify pools of customers. Bought by Many, for example, uses online search data to identify customers seeking similar coverage, and then negotiates favourable pricing. More than half (55%) of consumers would consider using peer to peer coverage for life Insurance, 38% for auto and 32% for home. We feature two examples in the P2P arena – Shuidi and Waterdrop (see table below).

Waterdrop has adopted a new approach that harnesses WeChat to sign up customers for low price/low limit risk pools. The use of telemarketing and agents remains an important component of the sales process but coupled with easy access that is under the control of the customer.

See the further analysis feature in this edition here for more on Waterdrop, Dnurse, Wukongbao and Xiaobang.

Multiple channels are required

Each of these distribution methods have considerable advantages, but they don’t do everything. The Accenture report believes that the successful businesses will operate multiple models while using technology to enhance their core distribution capabilities.

An example is Liberty Mutual, which is looking at an everyday risk coach model, focusing on the connected home through Vivint and nest.

This makes use of Amazon’s Alexa to navigate insurance by using voice. And this greatly improves the control individuals feel when dealing with quotes. And the benefit for the insurer is it uses an existing asset, which is agents, that have been a dominant channel for Liberty in the past.

Global growth

The adoption of digital marketing channels is not only driven by insurers, but by healthcare transforming itself with technology. Digital records are being adopted rapidly in many regions and TDI predicts this will provide a single source of truth, a global data sharing standard and reduce fraud and wastage by 2035.

Digital ecosystems are being developed fastest in Asia and these offer the multiple touchpoints that can capture the attention of customers and provide a springboard for insurers to move into new areas. A report by Swiss Re highlights the way Grab has evolved from passenger mobility into food and goods delivery and is now expanding into healthcare.

Collaborate towards a new future

Partnerships are increasingly important to Asian insurers, where the collaboration unites the underwriting expertise of the insurer and the partner’s access to ecosystems. In addition to new target audiences, big data and analytics provides new insights, allowing the insurer to better tailor future products and marketing.

Aviva has partnered with Tencent to sell critical illness policies online in China. Meanwhile, Africa insurers are using mobility ecosystems to sell insurance. These networks of interconnectedness must continue to form if incumbents are to be successful in becoming digital businesses. Those that fail to adopt – and successfully deploy – a number of these marketing channels, will be left behind.

Framework for distribution of health insurance in a digital world – draws on frameworks identified by the Oliver Wyman and Accenture reports outlined in this report.

Characteristics of distribution channelHealth Distribution Channel in China
1. Virtual insurance adviser2. Everyday risk coach3. Plug & play insurer4.Ecosystem orchestrator5.P2P Network operator
DescriptionProviding online consultation and ‘digital agent services’Lowering the loss ratio by minimising inpatients through telemedicine, routing claimants to lower cost hospitalsCross-selling insurance products at destinations is not new, but using analytics to improve the conversion rate of this activity is a breakthroughTrue ecosystem owners occupy a coveted place in the market. These digital platforms control the access to the ecosystem usersThe notion of mutual insurance has been re-invented as a way to identify leads for life and health insurance
Examples in ChinaXiaobangDnurseZhong An, WukongbaoWeDoctor, AliPay, TikTok, WeChatShuidi, Waterdrop
Sales methodO2O telemarketingDirect MarketingCross-selling at point-of-saleBundled into WeChat and AlibabaA ‘Tencent preferred partner’ on WeChat
How client centric is the model?Very client centricVery client centricModerately client centricMultiple sources of data make tailoring a simpler concept, very client centric as a resultOffers individuals greater options, but tailoring focuses on the group
TDI potential customer retention score5/55/53/54/53/5


Further reading

Insurance Factory: Insuretech boosts China’s online insurance market

Oliver Wyman:  China Insurtech industry report

Swiss Re: Health ecosystems: striving towards an integrated and seamless patient experience

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