Health Insurers don’t have it easy, even more so in low premium, price-sensitive markets like India. Rising costs of healthcare, rising disease burden led by chronic diseases like diabetes and hypertension, low penetration and a push to make healthcare coverage more affordable are all contributors to wafer-thin or negative profit margins.
The insurance industry has been trotting down a familiar road for a while now. Products offer less coverage at affordable costs because customers value coverage, but value lower premiums more. Sure the customer values health, but he values hospitalization cover more. For customers that want frills or benefits, they are inserted as a wellness benefit into the product. It helps in marketing, but does it necessarily improve health?
To some extent, the insurance industry manages to give customers what they want. They create products that sell at scale, and address unmet needs enough to market the product so as to deliver a profit. But while this is a starting point for India, it’s not sustainable. A recent Swiss Re Report showed the protection gap in India stood at a whopping USD 369 billion, led by households managing chronic conditions, and an overconfidence within the customer about current and future health and ability to withstand medical expenses.
Customers deserve more comprehensive coverage at a cheaper premium, with as little exclusion as possible. People diagnosed with chronic diseases urgently seek insurance plans that give them cover. But they are seen as higher risk customers. If they do manage to buy an insurance policy, they face much higher premiums.
Of course, insurers would prefer less risky customers, who stick with them through their long, healthy lives. But it's idyllic to think that they can survive with only one kind of customer.
In a capitalist economy, businesses need to generate a profit at scale and customers need to see added value in an offering that they are willing to pay more for.
The Insurance Regulatory and Development Authority of India (IRDAI), is already moving in the right direction, albeit slower than other Asian markets. It’s already encouraging insurers to incentivize members who demonstrate healthy behaviours, exploring the use of real time data including wearables, and recommending the implementation of a regulatory sandbox to provide a flexible environment for insurers to test out new, innovative products like dynamic pricing or pay-as-you-live.
The protection gap is the highest in households managing chronic conditions, which also have the highest propensity and inclination to purchase insurance. That’s where the largest opportunity is. Clinically validated digital disease management platforms have helped unlock this trillion dollar opportunity globally, and can help unlock hundreds of billions of dollars in value in India as well.
Digital health risk management, using clinically validated platforms to drive behaviour change and compliance, allows the insurer to deepen the relationship with the customer beyond just pricing risk. It allows policies with high cover to be made available at price points never before seen in India. It allows motivated customers to increase their coverage, benefits, and once IRDAI gives approval, lower their premiums as well. It increases stickiness of the customer, and improves customer satisfaction. By managing risk effectively, the insurer attracts and maintains a low risk profile, which in turn drastically improves profitability. And in all of the above, with 83 per cent of Asian consumers willing to share data with an insurance company, with a large per cent unconditionally for a premium discount, the time is now for insurers to tap into this.
Omada Health’s digital health prevention platform is used by Individuals, Employees & insurers in the US, where they have showed improvement in health and reduction in risk amongst tens of thousands of participants. Livongo and Welldoc’s digital diabetes platform has shown incredible risk reduction for self-insured employers in the US. Wellthy Therapeutics’ digital therapeutic platform, when used by health insurer in India for its population, has shown significant reduction in risk and improvement in customer happiness in a recent study (>1.1 per cent average HbA1c reduction across all participants who improved). All these platforms have some things in common: they understand how to work with insurers, have clinically validated real world results to prove they work, are well accepted in the healthcare ecosystem and have incredibly satisfied customers that have increased their trust with their insurer after participating.
There’s a blue ocean waiting to be tapped into, of motivated customers opting in and remaining sticky to great quality health insurance products. Real-time and reliable health data from digital health tools and willingness of members to share health data, and willingness to participate in digital chronic disease management programs in lieu of benefits such as a reduced premium, is a perfect opportunity for insurers to innovate. Once the insurer goes beyond pricing risk, and empowers their customers better manage their health, there’s an untapped, profitable, low churn market worth billions waiting. Those insurers that take an early move in this space will find themselves with safe, happy, profitable and sticky customers in their insurance pool. The future of health insurance in India doesn’t just lie in marketing products that sell, but also in creating profitable customer bonds via better health that lasts.