Digital Health – Light and Shadow for Life & Health Insurers

Digital health – for insurers “the digital transformation”, the “oil of the 21st century” – has been a hot topic for almost a decade now. So have digital opportunities now been fully embraced and a tidal wave of health data leveraged to the benefit of individual/insureds, healthcare systems and Life & Health insurers? Dr. Achim Regenauer’s view is that this transformation is still very much a work-in-progress, and here he explains why.

To start on a positive note. Life & Health insurers utilize a wealth of digitally sourced health data for risk analysis and employ digital underwriting solutions, such as sales platforms with integrated medical underwriting technologies1. On the other hand, many digital initiatives have remained at the idea or testing phase, e.g. wearables. Why? I think there are several (overlapping) reasons: issues relating to the data itself and its usage, a mismatch of digitization progress between the key parties, and issues relating to strategic thinking around digitization.

An individual’s specific health data has a number of characteristics that make it fundamentally different from, and comparatively more challenging to work with than, Non-life insurance data: (1) it’s personal and sensitive, (2) it’s subject to strict legal requirements, and last but by no means least, (3) an individual’s health is very complex and fluid, never static. Even if we achieved a complete analysis of the health of one insured, just a split second later the health metrics will have changed in line with the constant biological changes that take place within our bodies, such as metabolism and circulation. It’s not possible, therefore, to implement the same sorts of digital solutions as in Non-life. Accessing and leveraging health data at the individual level has its limitations, and in order to move forward given these limitations, we must think differently. I’ll come back to this point… But first, what about the other parties?

For healthcare systems, digitalization progress has to-date been sobering. Why’s that? Well aside from the many stakeholders often operating in silos with diverging interests and complex interactions, healthcare systems have tended to be conservative in their approach to digitization compared to other industries, and often also to lack the financial incentive for change.

However, it is my view that digitalization within healthcare systems will dramatically pick up pace in the medium term and become the new and sustained norm. Why? Because financial/budget pressures on national health systems are rapidly increasing due to demographic aging, medical and technological advances, staff shortages and the ongoing SARS-CoV-2 pandemic.

And now to the other party in this story, the party that has well and truly arrived in the digital world – the individual/insured – fully tech-savvy, always online, active on multiple digital channels (omnichannel), the party with high expectations for instant, digitalized solutions and ready to change commercial partners if trust is lost and/or expectations are not met.

When it comes to Life & Health insurance, as mentioned above, the industry has certainly made progress bearing in mind the limitations linked to health data, but looking at this from the consumer’s perspective, they must still grapple with diverse products, tariffs, exclusions and terms & conditions. Also, most products have mainly two points of contact, sale and claim, both of which have the potential to be confusing and/or disappointing. In addition, the consumer must focus on negative thoughts/eventualities and probabilities. Given consumer expectation, I would even say that our industry, without substantial change, is at risk of being usurped.

So it would seem that we – Life & Health insurers – are the party with the most work to do! How can we meet customer expectations, avoid customer disappointment and confusion, move into a more positive arena and fully leverage digital capabilities to stay competitive in a digital world? In my view, the answer goes well beyond the addition of new digital sales channels, digital marketing and automated processes, into a more revolutionary shift.

The car manufacturing industry gives an example of a potential path. Automobile conglomerates offer more than the original base product, the car, they now help their customers by solving multiple problems: they offer consumers the entire mobility value chain, from financing, maintenance and car assistance services, to motor insurance. With this wider, proactive, personalized approach, they create many more points of contact with their customers and provide them with solutions to a range of mobility-related challenges.

Could Life & Health insurers also do this? Instead of being a predominantly passive or reactive payer of claims, become a proactive player, i.e. proactively manage the health of insureds, such as by offering ongoing advice for a healthier lifestyle, possibly linked to premium reduction. And there are numerous ways to offer this without competing with physicians, and with regard to health data sensitivities and regulation. This would also be more fitting to the ever-changing nature of health.

And why stop there? If we consider the full value chain linked to Life & Health insurance, we come across financing and the impact of changing life situations. What might we do there?..

It’s also true, as mentioned above, that the insurance product, like the many features and options associated with a car, remains complex and “unexciting” for the consumer. Can our industry do more to make changes that would improve this? Compromises would be needed, but data and data analysis/predictive modelling could enable that. For example, at PartnerRe we have a strong team of Data Analysts – working with full regard to ethical considerations and standards2 – helping our clients deliver innovative new Life & Health products to meet the changing needs of their insureds.

References

1 For example, DUET Edge by PartnerRe http://partnerre.com/duet-edge-by-partnerre/
2 E.g. https://partnerre.com/opinions_research/ethical-standards-are-an-integral-and-critical-consideration-for-predictive-model-developers-and-users/

This article was put together based on Dr. Achim Regenauer’s opinions, and also discussions and editing carried out for the publication, “Digital Health, Is the euphoria justified?” The Geneva Association, December 2020. https://www.genevaassociation.org/research-topics/health-and-ageing/digital-health-research-report, and together with Dr. Sara Thomas, PartnerRe.

Editor: Dr. Sara Thomas, PartnerRe

Opinions expressed herein are solely those of the author. This article is for general information, education and discussion purposes only. It does not constitute legal or professional advice and does not necessarily reflect, in whole or in part, any corporate position, opinion or view of PartnerRe or its affiliates.

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