The good news for health insurers in Asia is that the region offers lots of growth, thanks to its rising middle classes and expanding healthcare systems. Happy days!
The outlook gets murky from there.
Insurers face a double-inflation whammy. First, the price of healthcare in the region is rising 10% to 15% per year, according to AXA, putting many countries on a trajectory of U.S.-style permanent cost increases. That means premiums should be 10% to 15% higher next year, but pricing is now an acute area of competition.
Second, lifespans are inflating, too, but not always for the best: Asians are living longer but are also sick or frail for longer. So demand for healthcare is soaring, but the means for many people to cover it is falling behind.
Beyond protection
Insurers therefore need to become radically more efficient, and only mass adoption of technology can drive costs down. This comes at a time when customer expectations (especially digitally) have changed, and trust in insurance providers is declining, especially around claims.
The common answers from industry executives now are twofold: shift the business from paying out claims to improving people’s health and lifestyles, so fewer claims are filed; and, as products become commoditized, to use tech to become more “customer-centric” and add value through means other than just writing a policy.
“Customers want services, not just protection,” said Joyce Au-Yeung, regional head of health at MetLife (these statements are from an insurtech conference in Hong Kong). She says over the coming five to ten years, the industry will morph into providing services around financial protection, with more firms sourcing value-adds from fintech partners.
Progress, however, has been tepid.
Is prevention a cure?
Insurers, unwilling to revisit their distribution arrangements or sales incentives, have attempted to create reward programs to nudge customers into better lifestyles. From wearables to medical checkups, the idea is to incent customers to improve their lifestyles in return for reduced premiums. In Asia, examples of this include AIA’s Vitality program, and ManulifeMOVE.
Even accepting these as just a first step in the right direction, are they making a difference? AIA digital executives believe this is a seachange, creating a customer-first approach; one told DigFinthis is part of a broader strategy to turn the firm from a pure insurer into a broader health-and-wealth service provider.
Rivals have their doubts. “We hear about prevention and customer engagement, but I haven’t seen a successful business model,” said Jérôme Itty, regional CEO at AXA Partners. “The jury is still out when it comes to designing programs to prevent risk.”
Edy Tuhirman, CEO at Generali Indonesia, says these products are mismatched for products covering many diseases, even those influenced by diet and exercise: it can take years to generate results against what are typically short-term policies.
Bob Charles, managing director at Hong Kong consultancy Coherent, says programs like Vitality and MOVE are progressive. They create incentives for customers so they claim less. But he agrees that the industry has not moved away from the product-usage mindset.
Although wellness programs are gaining traction among individuals, companies haven’t adapted them, Charles says. Employers buying group-life products have an interest in keeping their workers healthy, but the incentives have not been designed to satisfy insurers, employers, and brokers.
“Insurers know they need to be more customer-centric,” Charles said.
We love change. You go first
The good news is that there is now widespread recognition that tech and the customer will be competitive requirements; the bad news is insurers are moving too slowly, bogged down by conservatism and short-term, revenue-focused KPIs.
Most insurtechs have thrown in the towel on disruption in favor of B2B models. But a niche focus gets lost in the value chain of insurance policies: changing one aspect ends up rubbing against another department’s priorities, so nothing gets done.
No firm has embarked on a holistic, digital approach to health insurance. Cole Sirucek, co-founder and CEO of Singapore-based insurtech DocDoc, is trying to bring a Silicon Valley-style platform to Asian healthcare. He says the reason there hasn’t been an Uber, Airbnb or Alibaba in this space—one that connects a mass market to the information they need to solve their healthcare issues—is the presence of third-party payers.
Consumers may enjoy leverage with Uber but they don’t matter in healthcare: insurers, pharmaceutical companies, medical device companies, and hospitals have all the leverage. “Insurers aren’t really interested in consumer engagement,” he said.
He predicts an upheaval because products are more commoditized, claims-related problems have eroded faith in the industry, and margins are too fat for tech companies to ignore: Amazon has announced it will get into India’s insurance market, with other Asian markets to follow. Therefore incumbents can either try to defend on price (bad idea), or use customer data to provide services around health and welfare.
Sirucek has attracted to his platform hospitals, doctors and customers throughout the region, as well as partnerships with Ping An Good Doctor and Prudential Singapore.
But winning such deals is hard. One insurer CFO told DigFin she liked his concept but doubted it would fly internally, because other parts of her firm wouldn’t directly benefit from partnering with such a company. “Insurance companies are ruled by committee,” she said.
The best data idea we have
This reality is frustrating for startups. But it’s also a big reason why insurance execs seem at a loss as to how combine tech and a customer-first approach. It’s hard to align incentives with enough internal groups, let alone with external parties. The “ecosystem” is going to be a slow build, particularly if it means the insurer plays second fiddle to consumer-facing companies that own the data.
So surely then insurers will develop value-added services that take the customer on a journey, giving the provider more regular engagement and thus access to valuable data.
Sounds good. Maybe too good?
“Will consumers pay for services?” wondered Charles. “Are group-life customers prepared to pay for services? I’m skeptical.”
Pricing is another battlefield – nothing new in itself, but now, as comparison sites and other tech platforms erode product differentiation, it’s about dynamic pricing, which depends on consumer data. Too often, intermediaries like agents possess this data, and don’t want to share it with carriers.
One area where data is becoming readily available is genomics: the price of a DNA test has plummeted, and the data is terrific. Insurers such as MetLife are paying out claims faster now in places like China and Malaysia when the consumer takes a DNA test, Au-Yeung said.
Soon such tests will pinpoint at what point in a person’s lifetime they will contract which diseases. Industry execs say about 70% of a risk is genetic. That still leaves 30% that can be dynamically set based on user behavior. And execs pledge they will exclude individual DNA results from pricing models, for it is unconscionable to penalize people for simply having inherited troublesome genes.
But there is no regulation (yet), nor any conduct codes at the industry level, and “family history” DNA data is already being used in some pricing engines.
This is an example of data-driven, personalized pricing that, if not addressed at an industry level, will probably lead to a regulatory and popular backlash. It’s also a good example of something that looks consumer-centric while being anything but—the sort of idea that only an incumbent would dream up.
