Covid-19 has challenged many parts of the global economy, but the health insurance sector has weathered the last year better than most industries. This can partly be explained by consumers re-evaluating risks to their health when faced with unprecedented circumstances. Early on in the outbreak, the largest US vendor of life insurance policies reported a 15% increase in sales. Elsewhere, it’s been reported that only one in ten consumers have delayed taking out insurance policies due to the pandemic.
In recent months, the team at Alchemy Crew shared perspectives on various health topics — these include four recent health startups worth paying attention to, how to develop health insurance products for digital nomads, as well as how Covid-19 has exacerbated mental health issues globally. These are also examples of the research we focus on here at the Global CoCreation Lab.
In this article, I will broaden the scope of our discussion around health & wellness by exploring two impactful demographic-driven trends that insurers and insurtech firms need to pay careful attention to. I’ll also be taking a close look at exactly how firms can capitalize on these insights through the development of innovative new products and growth ecosystems.
Serving younger generations with niche insurance products
A major trend promising to shake up the health & wellness sector is the development of niche insurance products that serve a rapidly expanding insurance market — Millennials. According to the Pew Research Center, there are two and a half billion Millennials today. Collectively, the generation accounts for approximately $2.45 trillion in spending power each year and 32% of the global insurance market. Within 15 years, Millennial aggregate income will bypass that of all other generations.
Given those trends, it should come as no surprise that ample research has been conducted over the past few years into the health preferences of Millennials. In 2016, WebMD Health Services reported that, compared to Gen Xers (born 1965 – 1980) and Baby Boomers (1946 – 1964), Millennials (1981– 1996) are willing to put convenience and ease-of-access above comprehensive service in their healthcare interactions.
Recent research I was reviewing conducted by Alchemy Crew showed that Millennials and Gen Zers don’t think about achieving financial resilience as often as those from other generations. There is, therefore, a pressing need for insurers to create niche insurance products to help Millennials build more resilience, and they often prefer for those to be embedded into other products they care for.
Of course, Millennials are by no means a homogenous group — the Millennial market segment now covers all individuals between 25 and 40 years of age. 36% of Millennials in their 20s haven’t left their family homes while 65% of Millennials over the age of 30 are married.
Despite the complex makeup of the Millennial demographic, research carried out by Alchemy Crew demonstrates that consumers who fall into this generation tend to be associated with distinct attitudes toward health insurance. Insurers should remain cognizant of the particular buying habits and attitudes associated with the Millennial generation if they wish to create attractive niche insurance packages for it.
What do Millennials value?
A 2015 study performed by Blackhawk Engagement Solutions found that price is the factor with the greatest influence over Millennial purchasing decisions, surpassing other decision-drivers like store, brand, and availability. That might not come as a great surprise, but what’s interesting is that Millennials are heavily driven by the concept of pricing “fairness”.
Setting a policy price point that seems “fair” compared to the provided benefit should therefore be a starting point for any firm developing an insurance product for the Millennial segment. One company that’s already doing that in an adjacent sector is Root, a car insurance provider that uses app-recorded telemetrics to reduce premiums for careful drivers, thereby appealing to a sense of “pricing fairness”. Others like Oscar Health and Hippo have aimed to do so too.
Even though “price” may be the most important driver for Millennials, insurers have a tendency to focus on it to the exclusion of all other factors that impact perceived value. According to leading consultancy Bain, other important elements of perceived value include wellness, capacity to reduce anxiety, hope, and motivation which are more emotional in nature than the base needs we are all used to aim to fulfill.
In particular, insurers need to exploit opportunities to add innovation and insight to their Millennial-oriented products. In 2019, a Globalwebindex audience report revealed that:
the most common value-driven requests Millennials have for the brands they buy from are to provide innovative new products and help with the improvement of their knowledge and skills.
Understanding what Millennials want from life, health, or wellness insurance packages is one thing, but finding a way to promote that package is another. It’s vital that insurers remember to advertise such products through rich media channels — think blogs, vlogs, video, and talk media as well as pictures — that Millennials use while researching brands.
Approximately 89% of Millennial insurance intenders have visited YouTube and the vast majority are also active on social networks. Integrating brand strategies with these communication channels is key for the sale of niche Millennial insurance products. In short, the web isn’t necessarily changing Millennial health & wellness insurance products, but it is shifting how those products are sold and reach the consumer.
Closing the protection gap while addressing elderly health & wellness
Millennials might be coming into their own in terms of spending power but, around the world, the age group growing fastest of all is the elderly. The UN’s official population estimate states that by 2050, one in four (25%) people will be over the age of 65 worldwide. For reference, just that figure stood at one in 11 in 2019 (9%).
The challenges of an aging population
In his introduction to the UK government’s Future of an Ageing Population Report, Oliver Letwin writes that the reason the elderly population is growing is that people are living longer and that this should be considered as a
major achievement of modern science and healthcare.
However, as Letwin goes on to say, society is ill-prepared to deal with the demands of an elder population as
too many families face the choice between working and providing care for a loved one.
In 2018, a Swiss Re report delved deep into the needs of an aging society. The report revealed that some of the most pressing issues include the need to keep the elderly engaged with society and provisions for caregiving, financial wellness, and cognitive health needs.
Another significant challenge in need of solving in the context of an aging society is the “protection gap” for elderly people. In short, a protection gap is a difference between insured costs and actual losses that occur.
When it comes to elderly care and age-related expenditure, the vast majority of costs are not covered by insurance policies. In fact, out of the 11 trillion dollars annually spent on people over the age of 65 worldwide (excluding China), just 5% comes from insurance payouts. Most of the capital comes from the state (60%), with personal savings (25%) and family (10%) providing the rest of the funds.
A Geneva Association summary of global protection gaps reveals that care costs of just 25 hours a week would exceed the disposable income for the majority of the world’s elderly population. This makes clear how important it is that the insurance industry helps the over 65s increase their health cost resilience through targeted and innovative, and sometimes digital, products.
Long term care innovators
In Alchemy Crew’s review of the most impressive insurers in this space, they came across many examples of insurers moving quickly to assist with long-term care risks.
One example worth highlighting is that of Generali, an Italy-based insurer. Among others, this company is disrupting the health space through internal products, investments, and tech-focused acquisitions. Generali has just obtained CareLinx, a marketplace for professional in-home caregivers, and has invested heavily in a research company that specializes in the development of drugs to cure age-related diseases like Parkinson’s.
In my work with the Global CoCreation Lab in Miami, my team and I help our local constituents to develop home care solutions that range from in-home monitoring and caregiving devices to more complete personalized home monitoring and care solutions that also include designing and building a home based on the resident’s health, as well as creating new home-models that also include co-living with caregivers. We also work in areas such as Pharmacogenomics, targeted and personalized medicine solutions, and wellness and mental health where we deliver research to provide digital phenotypes of individuals’ state of mental health.
Contrasting the Millennial and Elderly segments
There are clear connections between the Millennial and elderly health insurance marketplaces. In both, insurers need to act fast and collaborate with technology services to develop new products that meet the needs of a changing populace.
However, as we’ve seen, much of the innovation in the Millennial-oriented health insurance space needs to occur in the sale, packaging, and delivery of products to consumers. By contrast, insurers working with lifetime care services primarily need to find innovative ways to expand the scope of their products’ coverage.
Strategies for success during the health & wellness transition
The full impact of the health & wellness transition won’t be felt for many years to come. For this reason, it’s not enough for insurers to focus on creating standalone products for the niches we’ve discussed here. Instead, actors in the space need to work on business model-level strategies to retain existing customer segments, acquire new ones, and deliver on-demand tailored coverage.
One of the best ways to do this is to take an “ecosystems” approach to insurance. This means that, rather than producing an individual product, insurers should work to develop interconnected digital services that serve multiple consumer needs.
In a 2019 whitepaper on ecosystem-type approaches, leading consultancy McKinsey suggested that insurers can best implement an ecosystem approach by acquiring new customers with core-products while also cross-selling newly created non-core products.
Chinese insurance giant Ping An Group is perhaps the ultimate example of an insurer that’s already taken this route — the conglomerate runs a holistic digital marketplace that enables consumers to purchase auto services, view smart city products, and explore real estate.
In 2020, Ping An launched Ping An Good Doctor, a health care service deeply intertwined with the group’s existing health insurance offerings. Good Doctor can be used to book and perform medical consultations via a mobile app, its wild success helped the wider Ping An healthcare network grow to nearly 200 million users.
A practical way to capitalize on health & wellness shifts via corporate venturing
As the Ping An case study illustrates, one of the best ways for insurers to uncover the groundbreaking methods needed to solve health challenges is via corporate venturing. Inspired by the industry’s leading innovators, Alchemy Crew has refined its method to co-create with us in Miami, and here is a snapshot of the step-by-step approach which we intend to use to help insurers and financial institutions in the Health and Wellness sector prosper:
- Discover market, tech, or customer-focused trends to define or refine your ecosystem strategy.
- Validate assumptions through iterative sprints and fast-moving discussions with stakeholders.
- Incubate and decide between building or partnering to shape the ultimate digital platforms, business models and behind-the-scenes capabilities.
- Commercialize through the right testing mechanism to bring your product, service or new business to market or transform an existing business/ operating model.
My last thoughts
The story of the ongoing health & wellness transition contains broader lessons for insurers and adjacent businesses in other sectors. Most importantly, it shows that it’s important to take a structured, big-picture approach to complex problems.
Thanks for taking the time to explore this topic with me. I’d love to hear your experiences of shifting trends in the health & wellness insurance space — don’t hesitate to send me a comment or question on LinkedIn
About Kjell de Orr
With over 25 years of board level and CEO experience with leading international marketing, insights, innovation, transformation, and advanced data analytics expertise, today Kjell enjoy leading strategic partnerships at Global CoCreation Lab, a Healthcare and Wellness innovation organization, and an independent spin-off from a unique collaboration between renown academia and Miami Dade County in FL USA.
Kjell was CEO at leading Market Research groups in Consumer Tech (Ri/Kantar WPP), Healthcare (GfK MH), and Online Market Research (IPSOS and Dynata). At LSE he was a partner in innovation and strategy that worked with clients such as UN, Shell Oil, Lego, NASA, and Barclays Bank amongst others, after which he moved to Melbourne as a partner in a branding agency.
In 2010, Kjell moved to the USA to lead IBOPE Inteligencia research’s USA and Mexico offices. He then spent 7 years as the managing partner of Newlink Group, a US, Spain, and Latam transformation, and marketing agency where he led the groups’ insight, and digital analytics transformation across their network, working with Visa, Chubb, Novartis, Sanofi, Medtronics amongst others.
As a seasoned advisory board member to tech marketing and AI data analytics firms, his volunteering spans mentoring at tech accelerators, advising as a board member at United Nation Association Miami, being a university guest lecturer, as well as a board member in a non-profit for youth entrepreneurship. With Alchemy Crew, Kjell designs the international insurance health and wellness programs of tomorrow.