The Rise of Healthcare Ecosystems: Advantage Insurance?
It’s a chilly Monday morning. Mr. Mehta is out for his daily jog donning his fitness watch before having to attend a huge line of meetings scheduled for a hectic day ahead. As a 55-year old executive, he is well accustomed to the onerous routine. On reaching home and getting ready for the day, his health insurance provider comes as a blessing in a rather unconventional way: it rewards him with a free diagnostic test from a partner lab for having met his daily walking target over the month.
While all of this may sound like a fable set in the future, such a case may soon become a reality with the growth of the insurance, healthcare, and technology sectors: all of these coming together like clockwork to open doors for such possibilities.
Introduction: the Current Components
An ecosystem model would encourage cross-organizational, multidisciplinary, and collaborative healthcare delivery under the triad of the patient, the provider (hospitals/labs/pharmacies), and the payer (insurers). It would undoubtedly disrupt the healthcare industry and also help address the frailties and inefficiencies in the current system.
In my previous article where I focused on technology in the insurance sector, I highlighted motor insurance as the leading segment in general insurance. I closely looked at the GWPI* figures for Q1 FY ’22 as per IRDAI, and it showed me figures that make one trend crystal clear: there has been a surge in the demand for health insurance policies, obviously driven by the pandemic and the widely available evidence of how expensive COVID-19 care can be. Premiums for health insurance generally witness a sharp growth in the month of March for a rather simple reason: it’s the end of a financial year, people rush to buy policies to save on taxes. The pandemic-driven growth has been much stronger over 2020, with PolicyBazaar registering a growth of 35–40% in the sale health policies vis-à-vis the same in March over the past few years.
(*GWPI stands for Gross Written Premium Income, the principal source of an insurance company’s revenues)
There has been an appreciable growth in healthcare infrastructure across India. The government has mandated spending of 3% of the nation’s GDP towards healthcare from the current 1.28%, the hospital industry is growing at a CAGR of 17% (2017–23) with modernized equipment and wider reach, and the diagnostics industry is growing at a commendable 20% driven by awareness, an increased household healthcare spending, and lifestyle changes. Insurance firms have augmented their cashless network by adding more hospitals and labs to cater to every corner of the country.
Building the Biome: Growth Avenues
All players in the current healthcare system are perceived as being industry-centric, opposed to customer centric. This is where technology companies come in, brandishing their analytics and insights capabilities and their customer-centric business approach: to help provide a 360-degree view of the customer.
Healthcare technology, obviously monikered as ‘Health-Tech’ has been growing in leaps and bounds. Telemedicine has been gaining foothold with virtual consultations becoming widely accepted, and e-pharmaceutical players like Tata 1mg and PharmEasy are prescriptions of growth in their own right: offering access to diagnostic services and virtual consultations as well. Technology has also been a boon to the wellness space: Cult.fit, for example, has launched an online fitness and training platform offering a host of other services similar to those offered by Tata 1mg.
Bajaj Finserv Health is a new undertaking of Bajaj Finserv which aims to be a one-stop-shop, a personal health manager providing all round healthcare services and drawing synergies from other subsidiary companies for offering insurance and financing avenues. It has adopted a mobile app-centric approach to onboard the tech-savvy Indian populace.
Wearables provide a much needed data-driven insight and can connect to smart devices — bringing convenience and portability like never before. The Indian wearables market, like the global market, has registered stupendous growth (170% YoY growth in 2021) backed by the increasing awareness of a healthy lifestyle, and the growth of e-commerce itself. Indian players such as Noise and BoAt are also making significant gains. In 2021 itself, Indian health-tech startups have secured funding of $1.3 billion. If you keenly follow the startup space, you would in all probability have come across Ultrahuman, a fitness platform touting a wearable blood glucose tracker — heralding the startup’s shift from being a plain vanilla fitness platform to promoting metabolic health.
The proliferation of data can make the old-school way of second-guessing one’s customer irrelevant, and the world is headed that way. Ecosystems can benefit by leveraging not only the volumes of data, but also its interoperability to provide an augmented value proposition. Technological innovations have made all of this possible.
Innovations in Health Insurance
The insurance industry’s regulatory body IRDAI has encouraged such innovations under a regulatory sandbox scheme that provides insurers the opportunity to ideate, test, and ‘alpha launch’ new innovative products to make insurance more customizable and hence more popular. Under this scheme, the insurer is provided with a timeframe of six months and an upper limit of 10000 (volunteering) customers. Post the said period, the policy will be deliberated by IRDAI for approval and potential commercial release. The validity of this scheme was from 2019 to 2021, but the regulatory body has recommended an extension of two years to help products which could not complete experimentation due to the pandemic.
The IRDAI granted approval to plenitude of policies across life and general insurance under three tranches, and some products in the health domain caught my eye:
a. Friend-assurance: Regulations do not allow prospective policyholders to form a group specifically for buying insurance policies (high risk of adverse selection). Under the regulatory sandbox framework, however, three insurers — Max Bupa, Kotak General Insurance, and Care Health — have proposed products that are exempted from this rule. Perks in such cases can include partial refund of premiums in a scenario of no claims (just like a no-claim bonus during motor policy renewals). It will also benefit each policyholder with better rates, and more coverage scope.
b. App-monitored wellness programs, and wearables: Digit, in partnership with PolicyBazaar launched one such product with wearables. Bajaj Allianz & Kotak Mahindra too launched wearables-linked health insurance pilots, in partnership with the fitness technology startup GoQii. These pilots aren’t using wearables data to calculate premiums based on individual health risks, but are promoting a healthy lifestyle via rewards (renewals premium discounts or co-pay adjustments). ICICI Lombard also offered a Diabetes Mellitus wellness program where blood sugar levels would be monitored regularly via an app with potential rewards attached.
c. OPD with rewards: Policies primarily fund hospitalization, but there has been a demand for a mechanism to fund doctor’s consultation and pharmacy bills too. Some products, such as the OPD policy by Care Health provides reward vouchers within a week. This is a case of instant gratification, circumventing the one-year waiting period of premium reduction.
d. Need-based insurance, crowdfunded policies: Need based insurance products catering to lifestyle diseases apart from COVID-19 coverage was interesting. Star Health’s Cancer Gold was a first for cancer care. Acko’s policy of crowdfunding the premiums of non-family members (cab drivers/delivery personnel) is a positive step towards helping the underserved.
These pilot policies highlight the increasing proclivity of insurers to innovate, and with many growth drivers conducive to the ecosystem approach, it is only a matter of time when the holistic needs of the patient are addressed and healthcare is delivered beyond traditional service lines, via integration.
Challenges in Mutualism
The rise of ecosystems comes with its own set of challenges, a fundamental one is that all partners in the ecosystem need to be on board. In a healthcare context, players come from different business structures and hierarchical models. So much that incentives are likely to be misaligned, dissuading players from boarding this ship. The investments required in such a cooperation are high, and so is the cost of failure.
Any business ecosystem must ensure sound governance, robust configuration, and a strong monetization framework to prevent any disintermediation. Most ecosystem models foster the collaborative problem solving approach but fail to sustain it in the long term. The Indian healthcare landscape at large is currently siloed, even the partnership between insurers and hospitals requires more trust to deliver meaningful value to patients. And trust between players is key to the long-term sustainability of any ecosystem: be it biological or digital.
Conclusion
Although available statistics hint at a potential of such an ecosystem for healthcare, the model needs to ensure sustainability to be of relevance. The policies under IRDAI’s sandbox for example, haven’t yet been commercially released. There are still a lot of developments needed in the insurance value chain itself, such as in risk profiling and underwriting. The current policies offered in India are a far cry from those in mature markets. Harnessing the best of technological breakthroughs is key: it can help the healthcare and insurance sectors leverage data for valuable insights. For this to become a reality, it is imperative that the goals and incentives of all players are aligned, and that the patient is always kept at the focal point. Healthcare is poised to become demand-driven, all winds are in favour of a shift from a reactive/episodic to a preventive/continuous model. It is all left to the ships of insurance-to take sail and lead the transformation.
(Disclaimer: The author is a Business Consultant in the Banking, Financial Services and Insurance domain at Tata Consultancy Services Ltd.)
Sources
a. Healthcare Industry Report: IBEF
b. Heath industry snapshot: Invest India website
c. IRDAI press releases
d. HealthcareITNews website and newsletters
e. Health-Tech resources: TechCrunch website
f. YourStory article: Startup funding statistics
g. MobiSoft article: Digital healthcare ecosystems
h. Newspaper articles: MoneyControl, FinancialExpress, Mint, Economic Times
i. Company websites: Star Health, Religare CareHealth, Digit, Acko
