In our July blog, we set the scene on the prevention landscape in the UK. We now consider what the market thinks about wellness and prevention.

To do this, we have collated views from the wider insurance and reinsurance industry globally, to understand their views on wellness and prevention in the life and health insurance and reinsurance space. Key questions asked included the following:

• What are providers currently doing on wellness and prevention?

• What are their challenges and opportunities?

• Where would they like to see further investigation?

This gave valuable insights into the industry’s mindset, highlighting both challenges and opportunities. We have shared the key findings below relating to the UK market. This blog focuses on the first two points. Areas for further investigation will be addressed in the main report. It covers some of the key challenges that insurers face in implementing a wellness programme, as well as some thoughts on how to overcome these challenges.

What are insurers doing now?

Insurers have already adopted some wellness-related measures. These include the following:

• Value-added services: For example offering a second medical opinion and digital GPs

• Premium reductions: Some providers offer premium reductions to policyholders who provide data on their activity levels, for example.

For more information on the current industry landscape, please refer to our forthcoming main report.

Return on investment and effectiveness of wellness programmes

To get insurers to implement a wellness programme, they need to demonstrate that the return on investment from doing so is sufficiently high. But it is difficult to prove that light claims experience following the introduction of a wellness programme is due to the programme itself rather than self-selection, making it difficult to assess the return on investment.

There is a lack of evidence on long-term behavioural changes that feed through into mortality/morbidity experience. The lack of data to produce a valid return on investment estimate and the lack of long-term supporting evidence make it difficult to build a business case for board approval.

Senior stakeholders in insurance companies will want to see immediate results, even though wellness programmes take time and require sustained engagement with policyholders.

However, in the medium and longer term, implementation of a wellness programme may be expected to lead to improved claims experience and hence higher margins for the same premium levels. There may be tangible benefits from considering return on investment over a longer timeframe.

Customer engagement

Respondents noted that the approach to get policyholders to engage with a wellness programme offered by their insurance provider is likely to vary depending on product type. Issues were also raised around self-selection and how well the industry is trusted by the public.

To get around trust issues, insurers will need to show policyholders how their data is used, as well as showing tangible benefits from using this data for policyholders (for example by offering rewards).

The following challenges were observed:

• Customer engagement can be difficult, as people don’t want to think about negative life events such as death or disability happening to them. This means lack of motivation to change habits. For any prevention programmes to be effective, long term consistent behaviour changes is required.

• The benefit is greater if less healthy policyholders are persuaded to engage. But this group may be harder to reach and getting them to engage may increase costs.

• Few policyholders actually understand the benefits they have access to. They don’t see the value in protection policies because protection is sold rather than bought. Conversely, some respondents admitted that they have not been good at communicating the benefits of their services. This differs by product type. For example a PMI customer who has a bad back might see how using physiotherapy could prevent this from becoming a more serious issue.

• Most people don’t connect protection insurance with health. They use Google or AI to ask health related questions rather than going to their insurers.

• Levels of trust in the insurance industry are low, and policyholders may have legitimate concerns about how this data is used. But any wellness programme would require insurers to collect large volumes of customer data to monitor their health.

• Policyholder consent will be needed for insurers to use customer wellness data, and any wellness programme would need to be GDPR compliant.

All that said, we should not lose sight of the value we do offer as an industry and should use this as a driver for customer engagement. Digital GPs and second medical opinions are considered by industry professionals to be extremely high value to customers. But they don’t require policyholders to change their behaviour and are more useful for solving problems as they happen, rather than for prevention. In many cases, firms offer these benefits because competitors offer them.

Adviser engagement

Some respondents raised the issue of adviser engagement and the importance of getting advisers on side to promote wellness programmes. Advisers may be reluctant to encourage customer engagement unless they benefit from it, which could increase costs. Wellness propositions may also be more complex than traditional products and by being more challenging for advisers to get across, may increase the risk of misselling.

Product innovations can be more problematic for advisers, as they are not easily comparable with other products. Portals are designed to standardise product features, so unique wellness propositions do not sit easily with this.

Conversely, a wellness proposition may be a way of cementing relationships between advisers and customers, giving them opportunities to upsell other products. It may give advisers an opportunity to broaden their client base, focusing on younger, digitally engaged, health-conscious individuals.

Early intervention

It is often difficult for insurers to identify people early enough in their health journey and support them during the progression of their disease. They would not have access to NHS data. There is also a risk that early intervention leads to increased early claims (even if overall claims are lower due to early intervention). Interviewees note that this would not be an issue for life insurance, for example, where early intervention would be expected to lead to reduced claims throughout.

On the other hand, participant feedback was that early intervention is important. For example, getting people access to digital mental health support sooner would typically reduce claim costs for health insurance.

There was positive feedback from participants on the use of health checks as a means of early intervention. If someone finds out they have high blood pressure or cholesterol, they could do something about it. However, certain health checks such as cancer screening can be expensive.

Data and data quality

A challenge raised by respondents is that the data needs to be of sufficient quality for insurers to be able to use it to inform and update their ongoing pricing and underwriting. Poor data quality, like inconsistencies between wearable devices, would undermine the effectiveness of any wellness programme. Although respondents commented that wearables are a major step forward compared to self-reported questionnaires.

Wellness data is likely to supplement existing data and respondents commented that it cannot be used on its own when making underwriting decisions. Similarly, GDPR and the strict requirement for consent prevents wellness data being used for underwriting decisions.

While wellness data shouldn’t replace existing data, it is useful for building a narrative around someone’s health. And if this data is collected and a potential health issue is identified, then this can be flagged to a customer so that they can take remedial action if they choose.

Company budgets

Several providers raised the point that introducing a wellness and prevention programme would increase expenses and hence could be an issue given tight budgets. There is a lot of competition on price, which increases pressure on claims costs and expense discipline. Low profit margins for the industry makes it difficult to offer a comprehensive wellness programme. Feedback from our interviews was that some clients were interested in offering a wellness programme but were put off by the price.

There are also competing priorities for most insurers. They could instead spend their budget on digital transformation or streamlining underwriting processes for example. Wellness may not be a priority for them.

Sub-optimal risks where prevention can have the most impact are more expensive to process, as there may be more need for medical evidence or referral to a reinsurer or chief medical officer. If a customer then decides not to take up their policy, then the insurer would have incurred expenses without getting any premium back.

While such a programme may incur additional costs, this could be more than offset by improved claims experience. For example, if someone can seek help for a mental health condition before it becomes too serious, then this could prevent a claim ever being made under an income protection policy (although such benefits can only be proven for certain product types and certain claims).

Group market

Many people have insurance cover provided through a group scheme (for example through their employer). One possibility is that a wellness programme is covered as part of the group scheme.

As the employer would typically bear the costs of the group scheme, some employers may perceive group insurance as being too expensive or not meeting their needs.

But employers have an incentive for their employees to be in good health rather than off work on sick leave. This naturally aligns with a wellness programme and insurers note that engagement is better than for the individual market. The recent ‘Keep Britain Working’ report indicated that the government sees group schemes as a way of keeping people in work. So wellness programmes that are via a group scheme would be in line with government strategy.

Technology

Digital apps and the recent developments in AI may present opportunities for insurers, by helping them to implement prevention measures. This could be especially beneficial for mental health by encouraging policyholders to download and engage with mental wellbeing apps. There are also opportunities in terms of engagement and getting people to follow treatment (for example, apps to get people to stop smoking).

Personalisation and gamification may represent opportunities, and some insurtech firms are already using these.

About our working party

In the next few months we will share our full report, which will cover wellness and prevention in more depth. We are always keen to hear from members of the IFoA and the wider insurance industry. Contact us on LinkedIn.

Catherine Zhang (Chair), Natasha Singhal (Deputy Chair), Charlotte White, Deepesh Vaid, Etienne Bourdon, Ianthe Edgeley, John Higton, Jonathan Ikpe, Robin Duffy