By adaptive - June 22nd, 2015
Connectivity has been transforming the way we live for more than a decade, with technology transforming traditional economic sectors such as auto insurance. And as Siegfried Mortkowitz reports, health insurance is now getting a tech-based upgrade as well.
Usage-based auto insurance (UBI) has become a fixture of private car and fleet insurance, helping to lower premiums and produce better drivers. The recent eye-opening announcement by the venerable Boston-based John Hancock Financial company, that it would use real-time data to monitor and reward the healthy lifestyles of its customers, suggests that technology is about to transform the staid world of life insurance as well.
In April, John Hancock announced that it would become the first U.S. insurer to use the everyday health and exercise data voluntarily provided by its life-insurance customers to offer both premium discounts and rewards.
Though similar programs are currently being used in other countries, its launch by a major insurance company in the United States may signal a big shift in the industry. After all, the US is the largest life insurance market in the world, accounting for 20 percent of premiums written globally, according to the financial markets research company Trefis.
And even more importantly, the nascent program could signal a sea change in the way life insurance is priced and in the relationship between the insured and the company that holds his or her policy.
“The beautiful thing about this product is that it is a perfect alignment of the company’s and the customer’s interest,” says Brooks Tingle, senior vice president, Strategy and Marketing, at John Hancock. “We have relationships with customers that last decades. If we help them live longer and healthier lives, that helps us too, because people living longer is good for John Hancock economically.”
The program was developed by John Hancock in a partnership with Vitality, a subsidiary of the South Africa-based Discovery Health and the first insurer to reward healthy behavior. It awards points for fitness activities and healthy lifestyle changes, such as stopping smoking. These points accumulate and earn the customer a “Vitality Status,” which provides rewards and premium discounts of up to 15 percent.
Every John Hancock customer who chooses the Vitality program is offered a free Fitbit monitor, or she can choose her favorite device. “We’re device-agnostic,” Tingle says. On April 28, John Hancock announced the launch of a Vitality app for the Apple iPhone that allows its customers to record their activities via the iPhone and the new Apple Watch.
“People are loyal to their devices,” he notes. “We can interface with any device.”
Customers transmit activity data on a daily basis and are then rewarded, with points and gift coupons, for engaging in a certain number of workouts a week or month, not smoking and having in-range BMI, blood pressure, glucose and cholesterol levels.
Tingle says the Fitbit device tracks steps, but that a version is available that can also monitor heartbeats. “We also give points for gym visits,” he says. “Our program interfaces with major gyms. And we have an app for gyms that are not part of our program.”
In addition, he says, “You also get a certain number of points just for seeing your doctor, having a mammogram or dental screening. Data is collected via the primary care physician. You can even upload a lab report via our app.”
The coupons include discounts for purchases at Amazon.com or Starbucks as well as discounted room rates at Hyatt hotels. The points go to establishing discount status, categorized as bronze, silver, gold or platinum, with those at the highest level paying 15 percent less on their premiums than policy-holders not in the Vitality program.
Tingle says that John Hancock decided to offer the new product after analyzing the state of the insurance industry in the United States. “We started looking at the insurance industry about two years ago. The industry is not known for innovation, and the incidence of life insurance ownership has been dipping steadily. So we asked ourselves, ‘How do we change that?’”
After examining U.S. and overseas markets, particularly South Africa, and seeing the growth of data-based auto insurance, “we saw this interesting product and became energized by it,” he recounts. “We realized it is a solution that can be much more engaging for U.S. consumers and a way to let them drive costs down.”
According to Tal Gilbert, senior vice president of Marketing and Innovation at Vitality, similar programs are currently being offered in the U.K., South Africa, Singapore and Australia, and Vitality has partnered with Italian insurer Generali to offer the product in several European countries, including Germany.
“This is a growing product and mobile is increasingly an important part of it,” he notes. It was launched in 1997, when it consisted of customers swiping a card at the gym and using pedometers. “It started taking off when wearables started synching with mobile phones, around 2011,” he says. “Then came the first Bluetooth device, when you didn’t have to sync it. I see the Apple Watch as bringing this to the mainstream, as [Apple] has done with other devices.”
The program works best when it is habitual and a part of the customer’s everyday life, Gilbert explains. “You don’t want to be doing something extra to log your activities and make it work.” Eventually, he predicts, “it will be close to 100 percent mobile-based. It is becoming part of the lifestyle. You have a smart car, you have a smart phone, now you have smart insurance to help you get healthier.”
The Long Run
While John Hancock is the only U.S.-based insurer offering the program, Vitality is working with about 200 corporate clients offering their own health plans.
“Employers are allowing employees to track their progress through laptops and tablets,” Gilbert explains. Some of the companies are even subsidizing the devices.
In some companies, employees on the Vitality program make smaller contributions to the company health plan, in others they receive rewards, such as vouchers and points, and some companies give their employees significant cash rewards as an incentive.
Not only has productivity improved in these companies, Gilbert says, but it has created a bond between employee and employer that has increased employee loyalty. It also increases ‘stickiness’ between a customer and his or her insurer because “there’s more contact. The typical life insurance interaction for customers is when they buy the policy, and then once a year when they get the bill.”
Though some media reports have suggested that consumers may have concerns about their privacy in reporting certain activities to their insurer, John Hancock’s Tingle says that the greater customer desire is for participation in the program to be simple and easy.
“Their main interest in using a device was ease of use,” he explains. “No one wants to have to go to a website every day and input how far they ran or whether they visited the gym. Wearable technology makes getting credit for that activity completely transparent and simple. If the data is protected, the sky’s the limit in terms of giving value to customers.”
In fact, the response to John Hancock’s program has been “overwhelming,” Tingle says. “We almost never got calls from consumers. Now they are calling up and saying we want to buy your product.”
Both he and Gilbert believe this type of program is only in its infancy and can eventually provide even greater value by offering more interactive functions. “Via an electronic pill box you can get reminders that you haven’t taken your blood pressure medication,” Gilbert suggests. “This can be synched with your phone, which will send you a message reminding you to take the pill.”
Tingle suggests “a device that sends an alert that says the wearer is 30 minutes away from a heart attack. The alert is sent to a clinic and an ambulance is dispatched. It’s easy to envision that if you’re wearing that kind of device, it will be of great use.”
Both men regard the Vitality product as an agent of positive disruption for the insurance industry, and for personal health in general, with many changes still to come as more data is mined and analyzed.
“We’re at a stage now where we’ve had more sources of data over the last few years and much richer data,” Gilbert says. “There’s still a lot more that can be done with the data to improve health. Our focus is on translating this into behavior change, to get people to do more of what they want to do, to live healthier and live longer.”
For all the latest mobile trends, check out The Open Mobile Summit 2015 on June 29-30 in London.