Library: BCG – Life Insurers May Find New Growth in Wellness

August 2020 featured report:

Life insurance is undergoing considerable change in the US, in part promoted by the COVID-19 pandemic.

Wellness is a healthy choice for life company digital transformation 

A new found focus on health

Consumers have become acutely aware of the dangers of untreatable diseases and are more interested in protecting their own health – and that of their loved ones.

This new focus on health offers the insurance industry an excellent opportunity to shift the focus of life insurance away from mortality to the prevention of disease and increased longevity. So say the authors of a new report into the industry by Boston Consulting Group.

It’s good, but nobody’s buying

There is little opportunity for interacting with customers in a traditional life company and a lack of engagement poses problems. It makes it almost impossible to cross sell other products or to build brand loyalty.

Life cover has lost its allure. In the past decade, since 2011, 6% fewer US consumers have life cover, leaving just over half (57%) with a policy. When looking at millennials, that figure falls to just 34%.

This is why wellness as a strategy and product range has become all the rage in recent years. Financial wellness has become well established, with mental health being an integral part of that equation, particularly among large employers.

But moving into physical health is a no brainer for life insurers, as it aligns the interests of both sides of the policy perfectly. After all, consumers and insurers alike want the individual to enjoy a physically healthy, financially prosperous life (see exhibit 1 below).

But there is a question as to whether insurers can achieve this.

The data is almost there…

In the US, consumers, tech companies and even government have been pushing to simplify access to health data. The development of off the shelf genetic tests greatly enriches the data available on individuals, shaping insurers’ understanding of risk – both generally and within their specific customer base.

But the advent of personal health and activity data captured through wearable tech offers real time insights that can be used to influence and reinforce healthy behaviour – and thereby reduce risk.

And those suggestions from insurers will not fall on deaf ears. Research conducted earlier this year by BCG and LIMRA found that consumers would trust health and wellness suggestions made by their insurance providers.

This offers an opportunity for greater levels of engagement to build better relationships with consumers. Closer relations means more contact and better insights, but this will pay off for the individual they are rewarded for their engagement with a inducements – or just longer, healthier life.

How will it work?

It is early days, but Sharecare’s Real Age test provides consumers with a fitness and wellness age that can be compared against the age on their driving licence.

Life insurers may begin to offer inducements and rewards that improve health further, or encourage healthier eating. But for all this to succeed, says BCG, a wellness strategy needs three things: customer engagement (see exhibit 2); wellness capabilities they don’t currently possess, but could access through partnership; and mobilisation of the data network.

This latter point is essential to securing new business and avoiding churn in the existing customer base. However, the products must be simple – to buy, to maintain and trade up from – and the advisers need to understand the benefits not only to their customer, but for themselves as a tool to build the business.

Some will work it out

Wellness won’t suit every insurer, and may be too big a step for those without more than one touch point in a year. Advisers who look to build a repeat, long term business with the clients are more likely to be the best advocate, as they won’t be as reliant on front loaded commissions.

There is clearly a need for these service and insurers can change to meet that demand. The alignment between provider and customer also presents an excellent opportunity for an insurer that can make it fit in their business model.

Health is no flash In the pan

Even before the pandemic, US consumers had a ‘healthy’ interest in physical, mental and financial wellbeing. Life insurers that can make a blend of protection and wellness work for them will find they have extended their value proposition into not one, but potentially a number of new areas.

For more, see the full report.

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