Neglected, Unloved and Difficult.
That’s not me sitting on a couch explaining my life’s issues to my psychiatrist but rather articulating exactly how thermostats were described before “The Nest” was created. Choosing a product was a task really relegated to 50 something dad’s vis-à-vis a decision which a 20 something could make in a heartbeat. That’s exactly where Health Insurance is or was before the likes of Oscar and League came into being.
High Friction: to compare, to buy, to understand with antiquated claims processing. High Value: 8% of GDP spent on healthcare. Ripe for disruption.
It all began to change in 2010 when Obamacare or the ACA (Affordable Care Act) was signed. Since then there has been a deluge of investments in this trillion dollar industry, targeting consumer health insurance.
Zenefit alone raised $500M. I doubt collectively over the decade preceding ACA they had been an equivalent innovation investment across the entire insurance spectrum, to begin with. Brilliant! Not only this but in 2016, insurance tech startup deal-making by legacy insurance firms hit a record high. Traditional carriers were no longer shying away from insurance tech and were embracing the “art of the possible” through transformation.
The typical cast of characters in this blockbuster prior to the wave of digital disruption included: The Payers (Large Insurance Companies), Providers (Healthcare Professionals), Patients and the Pharmas.
The Payers, often considered to be in the driver’s seat as they held the purse; have traditionally pushed the providers to more outcomes focused metrics, heightened scrutiny of pharma companies and the effectiveness of the drugs and devices & increased cost sharing with patients. In a nutshell “The Payers”, over the years over-extended their influence because of the constant commoditization of their core services i.e. underwriting risk and settling claims. In swooped in the start-ups, disrupting & differentiating through a combination of the following core principles:
- Being customer-centric: Price Transparency, Mobile First, Easy to Use
- Aligning incentives to long-term behavioral change and paying for performance: Gamification, Points system and extremely outcomes focused
- Use of Mobile Health and Smart Products: Monitor and measure KPI’s which we finally have devices to quantify them on an ongoing basis
- Leveraging Data, the New Drug: Using Big Data to understand customer needs and deploying m-health solutions to optimize customer behavior. Possibly a new revenue stream too.
- Excellent Segmentation: Going after the under-served SMB and the self-employed with a vengeance
However, the wave of new tech startups need to invest in the core insurance business, analytics and algorithms to better screen customers- as one startup found out the hard way. Last year, they lost $92.4 million in New Jersey as the firm’s analytical models failed to accurately forecast “the people who signed up for coverage were sicker than the company had expected”. Teething issues one would say, but also drives home the point that companies need to be anchored on solid foundations, as they move fwd. A Hybrid approach perhaps. Very Interesting times indeed, as we collectively build a roadmap to the future & better and more access to health insurance through technology.