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  • December 2018
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The Digital Future of Health Insurance

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In Brief
With so many variables and so many opportunities, many different digital paths await a new generation of trailblazers. Health insurers need to start taking the first steps toward digitization now.

Diseases, treatments and regulatory systems around the world have all undergone substantial and rapid change. With surging digitalisation, that pace is increasing. RGA head of global health Alan Watts says the time for the industry to act is now.

The clouds are clearly visible on the horizon and have been gathering for years. Healthcare, already one of society’s great dilemmas globally, is poised for unprecedented global upheaval.

The issues and challenges are well-established and increasingly urgent:

  • Ever-escalating costs: In 2020, total global spend for health care is expected to reach $8.7 trillion or 10.5% of the world’s GDP
  • Disease shift from communicable to lifestyle-driven (non-communicable) chronic disorders (obesity, diabetes, heart disease, etc,)
  • Brick-and-mortar healthcare systems currently focus on treatment, not prevention
  • Unstandardised and uncoordinated care
  • Varied and inefficient payment models (primarily fee for service)
  • Fragmentation of services
With this storm fast approaching, the key question remains: What steps can health insurers take to make healthcare in the future more accessible, affordable, equitable and high-quality?

The Digital Forecast

Like meteorologists, health insurers must make predictions – essentially, educated guesses – based on available data, current trends and modelling projections. In health insurance, one new inevitability encompasses most projections: The digitalisation of medicine and, by extension, of health care. ‘Digital’ in this sense refers to the broad range of technologies and applications that are enabling efficient automation of many aspects of care and administration, better decision-making, stronger connectivity with more informed customers, and more advanced data-driven innovations.

Some of these include:

  • Telemedicine
  • Wearables/wellness apps (connectivity plus data)
  • Big data – growth in data streams, increased rapidity of collection and greater utility
  • Artificial intelligence and machine learning
  • Digital treatments

Complicating matters is the increasing number of companies now inhabiting the digital health space. The list starts with incumbents such as medical device manufacturers, hospital chains, pharmaceutical manufacturers and more. Joining them is a seemingly limitless number of digital start-ups from every part of the health care chain, facilitating high-tech baby monitors that not only let parents keep an eye on their infants but also track health metrics, digitally-delivered treatment options, and smart home platforms for the elderly. And all of these have access to deep venture capital pockets.

Then there are the digital giants such as Amazon, Google (Alphabet), Apple and IBM Watson, all of which are eyeing opportunities to evolve and disrupt health care delivery. The recent partnership of Berkshire Hathaway, JPMorgan Chase and Amazon to create a new company to provide high-quality, low-cost healthcare for their employees may be a forerunner of things to come. 

Uncertain Skies

The goal of health care digitalisation may seem clear, but the path to get there remains cloudy. Changing the industry requires changing established behaviours for both patients and healthcare providers. Transforming existing, entrenched business models, many of which still rely on paper for transactions and recordkeeping, cannot happen overnight. Regulations regarding all areas of healthcare will present another obstacle, as will concerns over data privacy. 

All aspects of health insurance’s existing business model will be impacted by the coming digital transformation: Distribution, underwriting, products, pricing and claims, as well as how health insurers interact with our customers. Winners and losers will emerge. The role of the company as a third-party payer in a purely financial relationship must be adapted to meet market demand. The challenge for the industry will be doing so in a timely manner. As the current marketplace is already packed with 160,000+ health apps, this may not be simple.

Right now there are many more questions than answers:

  • Will distribution channels become purely digital?
  • Will accelerated underwriting predominate as digital and data converge?
  • The era of big data is already underway. We are struggling to manage existing data – how will health insurers manage even more of it?
  • What new types of products will emerge, and which current ones will survive?
  • How will the health insurer-consumer relationship change as carriers engage consumers in wellness and disease management programmes?
  • As health insurers expand services, what will be the primary value proposition?
This list of questions reflects just the tip of the iceberg. Finding answers is an often frustrating and endless process. Given all of these challenges and unknowns, does health insurance really have to undergo digitalisation? Most definitely, yes.

A Brighter Future

Digitalisation represents a global opportunity to grow existing markets and open new ones. Insurers will be able to develop closer relationships with their customers and be enabled to partner with them in health management and lifestyle improvements. More efficient digital processes will also help control, and even reduce, costs and provide the opportunity to change the insurance payment structure.

Of course, this is all much easier said than done. Effective digitalisation will require new strategic thinking, which starts with making it a priority. It will also require significant investment of money and resources (even as margins remain negligible in some markets), as well as taking the risks associated with such investment. There will be no ‘sure things’ moving forward, and insurers must be prepared to fail and accept that as a by-product of a faster and more agile innovation process. Ultimately, past success may no longer determine future growth: The time to make educated guesses and place informed bets has arrived.

Progress may also require expanding the health insurance ecosystem by identifying and working with new outside partners, such as MedTech start-ups, app developers and genomics experts. It may similarly require hiring people who have different skill sets and viewpoints, such as data scientists, behavioural economists and web developers, and working with regulators to determine which partner can do what. Most importantly, it will require that health insurers have a clear value proposition (apart from solely financial) that customers will be willing to embrace enough to share more information about themselves and their health than ever before.

The good news: With so many variables and so many opportunities, many different digital paths await a new generation of trailblazers. One health insurer might focus on distributing simple and affordable products online to those who cannot access health care today, while another could become a big data expert and implement value-based health care and health insurance. Still another could specialize in insuring chronic disorders such as type 2 diabetes through use of wearable technology and other medical advances. The paths are many and will diverge and converge along the way. The only certainty: Health insurers need to start taking the first steps now.

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Reprinted with permission of The Asia Insurance Review (AIR)