Insurance

The ‘wellness’ trend transforming life insurance

October 2016

Experts are optimistic activity-tracking technology can change the insurer-client relationship.

Insurers are using data to promote healthy behaviour and more powerfully focus on customers, writes Nigel Bowen.

Life insurance has always followed a set formula. Broadly, the customer’s gender, age, health status and occupation were fed in one end of the machine and a set-and-forget price point and policy popped out the other.

Those days are now drawing to a close.

The birth of big health data

Future historians may date the start of the insurance industry’s disruption to September 9, 2008. That’s when the first Fitbit device was unveiled. Once activity-tracking data began floating around, insurers started trying to harness it to understand ongoing health behaviour, reduce claims and the prices of their premiums.

Insurers around the world are now offering policies that promise reduced premiums and rewards in return for policyholders sharing personal data demonstrating they are working towards or maintaining good health.

Locally, OnePath is piloting a health-coaching program for policyholders with particular health risks. If certain health goals are reached, premiums are reviewed and reduced. The company also offers a $200 Fitbit voucher to those who take out a Child Cover policy.

The expert’s take

Dave Slovinec is the South Australia director of the Association of Financial Advisers. He notes insurers have long aspired to more sophisticated underwriting. “Asteron Life experimented with this years ago. They offered discounts to non-smokers who maintained a certain BMI [body mass index] and further discounts if they keep up with good bill of health, however the specific underwriting requirements are still to be fine-tuned”.

ANZ Wealth insurance strategy and innovation manager Mark Powl concurs. ”The industry is now realising two long-held goals. First, it’s endeavouring to make underwriting more dynamic and providing more accurate and more affordable premiums. Second, it’s now finding ways to remain engaged with customers by having a conversation with the customer about their ongoing health, rather than just being in contact once a year with a renewal notice.”

But Powl’s quick to point out there’s more to reinventing underwriting than fashionable gadgets. “Innovation is about a new customer proposition, about making people’s lives better. That can involve wearable technology, such as smart watches. But it’s just as likely to involve tele-health coaching, robo-health coaching, health apps or personalised health portals.”

What’s the bottom line?

It’s still early days but experts are optimistic about the potential of activity-tracking technology.

“If insurers are going to offer an expensive smart watch to new customers, that may attract younger people,” notes Slovinec. “Older customers facing rising premiums as they age will be interested in containing their costs. It’s worth noting AIA has had a take-up of around 50 per cent for its Vitality policy. That’s a policy that encourages customers to set personal health goals. Rewards are then provided if they are proved to have been met.”

Powl says anything that boosts customer engagement boosts the likelihood of customers understanding the importance of life insurance and retaining their policy.

“Policies that involve consumer rewards, such as film tickets and shopping vouchers, are likely to be particularly attractive to the young and healthy.”

Getting with the program

“This isn’t a fad,” Slovinec says. “As time goes on there’s going to be a critical mass of ever-more comprehensive health data. That will improve actuarial data and mean a healthier book for advisers and healthier customers paying lower premiums.”

While equally bullish, Powl predicts widespread take-up will be contingent on persuading customers that handing over their health data isn’t going to backfire.

“There is an expectation that customers aren’t going to want their ongoing health data to be used against them at the point of claim or to increase premiums,” he says. “So policies will need to be no-lose propositions; discounts for good health but no penalty, beyond having to pay the standard rate, for a lack of it.”

From product to customer-led

“I don’t imagine many people will select a life-insurance solution solely on its health and wellbeing offering,” Powl says. “But that health and wellbeing offering should result in an insurer having stickier, more engaged, healthier and hopefully happier customers on their books.”

“The new approach makes engaging with clients of any age a lot easier,” Slovinec agrees. “It opens the door to an ongoing discussion of an individual customer’s health. On a macro level, there’s the scope to run competitions with prizes for, say, the policyholder who takes the most steps each month. From a marketing and branding perspective, it allows for a lot more visibility.”

Advisers, start your smart watches…

So what does the brave new world of big health data mean for advisers?

“A third of the advisers I come in contact with are already using activity trackers themselves,” Slovinec says. “If they’re not, they have friends and family members who are. I can’t imagine they’re going to need much training to work out how to communicate about ‘wellness’ to customers.”

“Advisers aren’t going to need much technical expertise,” says Powl. “They’ll just need to understand how, for example, a particular digital training app might benefit a customer and their ongoing health. The adviser’s role won’t change in this regard. It will continue to be determining the customer’s life-insurance needs and circumstances; then providing them with the best type and level of coverage at the best price.”