August 1, 2017
Is ‘Connected Health’ for Real?
A reduction in loss ratio of around 50% seems to be achievable through consistent and intelligent implementation of "connected health."
“Connected health” might shape the future of healthcare and of health insurance. I define it as any insurance solution based on sensors for collecting data on the state of an insured risk and of telematics for remote transmission and management of the data collected. Connected health offers a great capacity to register, deposit and analyze data that comes from the users themselves, giving the insurer never seen before insight into actual behaviors and lifestyles.
While “connected insurance” applies in many areas — with auto insurance leading the way — health insurance is a more delicate field that will probably face more obstacles on the road to a connected future.
See also: Healthcare Needs a Data Checkup
Insurance covers can be differentiated by client segments, and the insurer can propose different levels of assistance based on specific tools and services. Typical examples of health services are:
- Medical contents in multiple formats;
- Call center for emergencies;
- Pharmaceutical products ordering and home-delivery;
- E-health with specific devices for specific target patients (elder, heart problems and diabetes patients, etc.), including alerting on possible critical health conditions.
Furthermore, professional medical advice can be delivered in multiple ways (messaging, call, video). Discounted prices for doctors and medical structures can be proposed through a preferred network, while having the option of doing bookings and payments online. Another plus is to have one’s complete medical history stored in digital format to allow easy access.
With the objective to push through the adoption of healthier behavior and raise engagement, solutions include: gamification based on wearables and tailor-made goals, wellness content in multiple formats and agreements with gyms, shops and other types of service providers.
Connected insurance in the health sector is affecting the whole insurance value chain and generating real value for the insurance P&L. According to Matteo Carbone, founder of the Connected Insurance Observatory, five main value creation levers emerge:
- Risk selection;
- Risk-based pricing;
- Value-added services;
- Loss control;
- Loyalty and behavior “steering” programs.
Data collection can improve the overall quality of the underwriting process, allowing price adjustments or covenants. Devices can measure client behavior and collect data to customize covers and propose prices or discounts based on a one-to-one approach instead of a traditional approach based on averages.
The ability to monitor the “quantity” and “level” of risk exposure is now possible and can be applied to the single customer.
Value-added services have a double aim: on the one hand to guide clients toward desired behavior, on the other hand to offer services to clients. Some ancillary services are proposed to the insured clients to exploit relevant data detected; these services could be directly supplied by the insurance company or by means of an ecosystem of specialized partners.
Connected insurance can enable the development of a more efficient and faster claims management processes, while limiting the portfolio loss ratio.
Behavior programs use information gathered on the behavior of clients to direct them toward less risky solutions. A good reward system is a key, and programs based on innovative gamification approaches are a must, to keep clients engaged.
Experts estimate a huge potential reduction in loss ratio on medical reimbursement by implementing this innovative approach in health insurance. Starting from the current health losses on an average traditional portfolio, best practices show a potential saving of 20% by driving the choices of the insured within preferred networks of doctors and medical structures. The use of m-health tools can help lower claim costs by an additional 10%, while the implementation of loyalty and behavior “steering” can contribute a further 15%.
In synthesis, a reduction in loss ratio of around 50% seems to be achievable with a consistent and intelligent approach in the implementation of these levers.
Predictive and preventive alerts can potentially play a huge role, too, but that has still to be proven.
See also: Unconnected World, and What It Means
Insurance companies should gradually move from their traditional positioning as health insurer of an ill person (playing the role of claims manager and expense payer) toward that of a 360-degrees health counselor aiming to insure lower risk and healthier customers with a customer-centric, tailor-made approach.
Innovation should aim to transform the health insurance company from a simple payer to a player in the customer health journey. The industry has to move from a “cure” to a “care” approach.
So, is connected health insurance any good? It is a win-win for both insurer and insured. The insurer optimizes internal processes and cuts costs while the insured has incentives to live a healthier life!