Innovation, analytics and the future of health insurance customers

JAMES HAYBYRNE: Hello, everybody. Welcome to another episode of (Re)Thinking Insurance brought to you by WTW. I'm your host for today, James Haybyrne. And in today's episode, we're exploring how digital innovation, analytics, and new health propositions are shaping the future of health insurance.

To take us through this topic, I'm rejoined by Jessica Plewes and also pleased to welcome Lisa Balboa, who recently joined the health practice at WTW, as part of our expansion in this space. Jess, Lisa, welcome to the show.

JESSICA PLEWES: Thanks, James. Great to be here.

LISA BALBOA: Thanks, James.

JAMES HAYBYRNE: OK, guys. So to start us off, what's the biggest change that you've seen in health insurance over the past five years?

LISA BALBOA: Well, that's a great question. There's so much that's been going on over the past five years in this space. I think one thing that stands out to me is that customers underlying health needs are shifting. For example, we all know that populations are aging. There are rising chronic disease burdens. But what that means for health is that care needs are much more complex.

And with the public health systems being under strain in many countries, customers are turning to the private sector for faster access to care and ongoing support. So, in short, customers are open to new products and propositions to help them meet their ever-growing complex care needs.

So, Jess, I think we've been having some really interesting chats in the office since I've joined around what's been happening in the health landscape as well. So yeah, how do you see it?

JESSICA PLEWES: The biggest change that I've seen in the customers in the last five years. So I think that customers' expectations are changing. They're really seeking value. Today's customers are very different from the traditional health insurance customers. They're more digital, they're more selective. And in general, they're like less sticky. They're really focusing on the value that can be driven from health insurance. So they want to pay $100 and get $200 worth of benefits.

In this post-COVID world as well, I think there's a real focus on staying well. They're really focusing on well-being. And I think that's changing the demand in terms of the propositions that they're wanting from the insurance companies.

JAMES HAYBYRNE: So Jess, you just mentioned there around digital. So I'm interested in how digital transformation changing how insurers attract and retain customers?

JESSICA PLEWES: Thanks, James. That's a great question. I think within the market, we're really seeing insurers leverage digital channels across the full customer journey. In terms of how they are purchasing health insurance, how they're engaging with it, how they're using it for claiming.

We're seeing insurers in particular really leverage it in terms of their well-being programs and everyday interactions with customers. We're seeing them leverage it in terms of bookings for virtual GPs, for example, we're seeing them leverage digital in terms of platforms where they can engage their customers in preventative initiatives, how they can support claiming through their digital platforms.

We're also seeing in terms of how AI can be used as well in terms of supporting onboarding, reducing friction, and tailoring journeys from day one. But I will then let Lisa maybe step through a few more examples on that.

LISA BALBOA: Yeah, thanks, Jess. I think digital transformation and, in particular, digital health, you mentioned some great examples there. I think one thing that really stands out to me is that digital health is no longer a tool just for attracting and retaining really active and healthy people such as yourself. Jess and James, I know you both love to run, swim, pilates.

But actually these tools, as you were saying, things like virtual GP or things like virtual or guided mental healthcare, physiotherapy, even small nudges with smart health devices, they're really supporting insurers to build that ongoing relationship with their customers, whatever those health status or health needs are. And I think one thing that's particularly exciting to me is how these tools are being used as part of a preventative or early intervention healthcare strategy to create that win-win for the insurer and customer.

So it can support the customer's health, but also reduce the claim severity and sometimes the claims frequency for the insurer through acting early. And you mentioned that the AI part and the personalization. And I totally agree with you, Jess. I think these tools, again, mean that insurance is no longer a "one size fits all." We can be a lot more targeted to get the most appropriate tool, whether that's a mental health tool, a physio tool, some nudges, and advice into the hands of the customer who needs it most at that point that they need it.

So we're really moving away from that paradigm of digital health services that have low utilization and low fit to customers specific health needs to something so much more personalized and relevant to the customer. And yeah, that's so important. You mentioned customers are seeking that value from health insurance policies. They want to see that value. They want to what they're paying for.

So finding ways to use AI to get those relevant digital services or other health services that the insurer is offering into the hands of the customer, that really helps them appreciate the value from the product. And then stay and stick with the insurer over the long run.

JESSICA PLEWES: I guess on that AI comment, Lisa, I liked what you were saying in terms of that personalization. And I think that insurers are really using AI as well to help with the communication piece.

I think, in terms of how they're communicating to customers, but also using it for education as well in terms of how can we educate our customers. And I think customers, we're all using ChatGPT and Copilot as well to do our own research. And so I think that now customers are really using it as well for their own research on insurers in terms of research on products and propositions, or also leveraging it in terms of understanding their health needs.

JAMES HAYBYRNE: And so it sounds like this digitization is creating a lot more data for insurers. And I guess that personalization must be using a lot of analytics behind the scenes to figure out what's the right actions to take for different styles of customers. I wonder if you can dig into that a little bit more, Lisa, maybe, and explain how are people using analytics to shape new business sales and customer retention.

LISA BALBOA: Yeah, I think this is a great question. And for sure, machine learning, more sophisticated analytics are allowing more granular insights for the insurer. So take one example. It's possible with machine learning techniques to identify high-value segments that wouldn't have been spotted with traditional one-way analysis, two-way analysis, or even linear models.

So perhaps there's a particular group for certain distributors that to a certain age group in one part of the country that previously wouldn't have been able to identify and recognize as an insurer, but they're actually a key segment for your new business. So analytics can be used to identify that group and then to not just optimize the top line growth for that group.

But we also need to think, is that customer group where we're expanding? Are they profitable? So there's that famous saying revenue is vanity but profit is sanity. And there's so many things to think about when it comes to health insurance. The mix needs to be aligned with your pricing basis. The claims need to be tracking in line with the experience.

So building out those early warning indicators in growth segments. So perhaps, even looking at pre-authorization data for a leading view of claims that can be really valuable. So for me, it's all about building up those right dashboards, those right analytics strategies to give those early warning signs so that you can recognize segments that are growing, but also make sure that the segments that are growing and other segments in your book as well, are profitable as you expect.

JAMES HAYBYRNE: Great thanks, Lisa. Anything else you'd add as well, Jess?

JESSICA PLEWES: Yeah, I think that in terms of if we're just focusing on new business, I think that we're using data not only our own data, but publicly available data as well to understand and identify gaps. How is our customer base looking compared to the competitors, potentially identifying areas and growth opportunities for targeting to expand your market share.

And I think that also-- I think Lisa touched on, and I totally agree. I think what we need to be doing is making sure we're not just-- we're targeting the right customers, not just more customers. And I think that is that's really key.

I think also in analytics, I think we're really seeing-- I think that we have done well and insurers have done well in the recent times of growing the insurance participation, especially with issues with public system that Lisa mentioned. But I see all insurers that key focus now is retention. And how are you retaining the right customers? How are we retaining that good risk? So I see that analytics is crucial to this. And how are we then using predictive analytics as well.

JAMES HAYBYRNE: Cool. And I quite like the topic you were talking about there how analytics was being used for product design. What does proposition development look like for health insurers today? How has it changed what people are doing nowadays in that proposition development space?

JESSICA PLEWES: Look, I think proposition I think in terms of design and how we're using analytics, I think it's becoming very customer- and segment-specific. So we know that the needs vary by particular segments. For example, in particular, women's health is one that we're really seeing a growth in customer segments propositions.

And I think the designing propositions based on needs. But I think it's not just in terms of the features. I think we're also seeing that they're designing the propositions thinking around the distribution channels, for example. So whether that's digital channels attracting those digital and savvy younger demographics.

Also we're seeing them in terms of customer and customer segments, thinking about the payment models and also thinking about how that changes. I think propositions are becoming very digitally integrated. I think Lisa's already mentioned this, so I won't mention too much, but we're really seeing that the propositions that are being developed are really thinking around how we can interact not just with insurers, but also different services, whether it's virtual GPs. I'm thinking about mental health, online physios.

And I guess what's key to this is strategic partnerships. So we're really seeing insurers leveraging strategic partnerships to offer these health adjacencies services. And I guess the biggest differentiator I see in this is like with these strategic partnerships, how are they leveraging the data? So how are they leveraging the data that's collected through these partnerships, through better understanding, for example? How they're interacting in the primary care space? So I think that's key for insurers.

JAMES HAYBYRNE: Anything else you'd add to that as well, Lisa?

LISA BALBOA: Yeah, I think Jess has covered it really well. I think the data's really important. But it can sometimes be really challenging if I think about emerging medical tech and treatments, whether it's in the cancer space, cardiovascular, neuro, whatever condition you want to look at, these are hugely exciting. They offer loads of promise, but it does take time to build up that value-based evidence across a large enough population pool to work out which cohorts are going to be the ones where these treatments benefit relative to the cost. And, of course, just ultimately making sure we're getting the right treatment to the right customer at the right time when it comes to health insurance.

I think one really interesting innovation, if you can call it that, in the product and proposition space, is the supplementary riders that are enabling access to this new technology and new treatments in a way that helps to protect that core book from rising medical inflation. So rather than taking a new, expensive treatment and providing access across the whole book, actually ring fencing that, making it a supplementary rider in the beginning that people can purchase.

And that allows in the meantime for data to be built up on outcomes in terms of the value, in terms of the cost equation for the new treatments. But at the same time, it is making those treatments available for those that want to access them. And I think as that medical science becomes more personalized, we've spoken a lot about AI, the personalization of proposition, but actually diagnostics and treatments, they're also becoming more personalized.

So I think at some point, just marrying that up and saying, on the one hand, we have these personalized diagnostics and treatments. On the other hand, we have more personalization of propositions through things such as AI and digital transformation when it comes to actually reaching the customers.

When we start to combine that and be able to develop a product that gets those cutting edge treatments from the personalized medicine space into the hands of those customers that need it, I think that will be a really, really exciting journey ahead. And there'll be products to watch over the coming years for sure.

JAMES HAYBYRNE: Yeah, thanks for that, Lisa. That's really interesting hearing about some of those product innovations. And I guess I look forward to some of those coming on the market and being able to purchase some of them.

And I guess you two have been traveling quite far and wide recently. And I'm interested in on your travels. Have you seen any global examples which might indicate where health insurance innovation is likely to be headed? And I guess maybe, Lisa, if you go first.

LISA BALBOA: Yeah, I think there's so many great global examples of innovation. I think starting a little bit closer to home, which for me is in London. So let's think about the EMEA market.

So I think one thing we're seeing there is enhancing pricing through more sophisticated modeling techniques like GBMs and focusing on pricing optimization to support innovation. And also to support the ability to empower pricing teams to deploy their pricing in terms of the machine learning models that they've built. And to deploy that without being as dependent on the IT teams where they spot those new rating factors.

I think one thing as we look, for example, at the Middle East market that's quite interesting is a move towards value-based care and an outcomes-driven approach. In certain countries in the Middle East, we're seeing adoption of value-based care. Of course, in the US, that's already quite a popular model that's come into play as well.

And I think when it comes to that side of things that interlink between pricing claims and innovations that cut across both worlds, particularly things like in preventative care or early intervention that we've mentioned, that becomes really exciting. And then I've been chatting a lot to our Latin America team since I've been joining.

So really understanding that market more. It's been great to get some insights there and think about things like pricing sophistication for that market, the use of analytics to steer the business, but ultimately also tackling the challenge of having affordable health insurance products despite rising medical inflation. So we see that in LATAM. We also see that in many other markets as well.

JAMES HAYBYRNE: Yeah, great. Well, exciting to see how the future is going to look. And I guess on that same topic, I mean, how do you see the health insurer of the future? What does that look like? What does the health insurer of the future look like to you guys?

LISA BALBOA: Yeah, I think that's a great question. Obviously, we don't literally have a crystal ball, but I think building on some of what we've been saying. And particularly Jess has highlighted this, that partnerships are likely to play a key role across insurers, digital health providers, hospital and care providers, as well as the tech platforms.

So if you think about what that means for a health insurer of the future, they're going to have to be able to deliver that joined up care. So joining up those health services by leveraging the best of technology and healthcare and combining that together.

And yes, that means taking advantage of data. I think also building that customer trust and securely managing that data, being really transparent on how that data is used is going to be even more important for the health insurer. It's already so important today. But if we look at the potential that's out there in terms of the new technology, healthcare delivery, personalization of care, having that data governance is going to be really, really important.

And I think one thing that I have been thinking about lately, discussing with some of the colleagues, is on the horizon, what's that distribution of the future going to look like as well? We have agentic AI coming on the scene. Is it going to be supporting customers to compare and buy insurance policies depending on those evolving healthcare needs? So that's one where health insurers of the future may need to adapt into new distribution channels from the technology changes around us as well.

JAMES HAYBYRNE: Jess, how about you? How do you see the health insurer of the future?

JESSICA PLEWES: I think the probably the one thing that I will add and look we've spoken loads around partnerships and integration and health services. But I think globally, we all know that within the health system, sustainability is a challenge globally, not just for the private market, the public system as well, with aging populations and higher incidence of chronic diseases and rising costs.

So I think there will be a continued focus on sustainability of the industry. And given that premiums follow claims considering the affordability for customers as well. So look, insurers need to grow sustainably. So they need to be continuing to think about are they attracting the right customers.

And then in terms of that need to focusing on cost control. So like Lisa mentioned as well, I'm quite excited about the move to value-based care and potentially what we see there. I think that with insurers that there is a big push now for cost control, improving health outcomes, and lowering costs.

And I think key to that is working with the providers. I think it's been challenged historically because of different KPIs or different priorities. But I think that now is the time that we really should see and hope to see more of that provider-payer partnership.

And then I think the other thing is what's quite exciting for me in terms of what the future look like. I think that rather than being that traditional payer of claims, I think that's gone has been and gone. I feel like I really see that with the new style of customers that are coming in. I really see that insurers are healthcare partners and not just focusing on insurance. So yeah, I'm excited to see how they help support customers with affordability and grow and develop their propositions.

JAMES HAYBYRNE: Cool. Thank you both. Thank you for getting out your crystal balls and looking into the future for us. I'll try and bring you back to the present day now and give you a bit of a teaser question. So let's say you've only got 10 seconds to explain health insurance to a teenager. What do you say to them? Lisa, you first.

LISA BALBOA: Yeah, great question, James. Not easy, only 10 seconds. But I think for the gamers out there, I'd say health insurance is your IRL armor upgrade. You pay a little each month, so big medical bills don't hit you for full damage.

JAMES HAYBYRNE: Nice, I like that. Bring to the teenagers, bringing the gaming in. Good touch. How about you, Jess? How are you describing it?

JESSICA PLEWES: OK, I'm going to go down the Netflix route and say that health insurance is like a subscription to your health, that it covers unexpected health costs and keeps your body fit and healthy.

JAMES HAYBYRNE: Great. Thank you. I guess final question then of the day before we draw it to a close. So I think a lot of our listeners are probably working for insurers. They're probably inside health insurers. If you were going to advise them on one thing that they should do in the next 12 months, what would it be? Lisa, why don't you go first?

LISA BALBOA: Oh, that's a tough one to pick, just one practical thing from today's conversation. I think what I would focus on is really to suggest that you embed analytics into the core of your business. So just start with one end-to-end process. Ideally, that spans across a range of function because sales, pricing, retention claims as we've seen, they don't work in isolation. So start with one end-to-end process, embed analytics into that, and then scale up from there.

JAMES HAYBYRNE: I like that, yeah. Very on topic as well. Having analytics big, big space in that at the moment in health insurance. So Jess, Lisa has already taken analytics. How are you going to advise insurers over the next 12 months?

JESSICA PLEWES: Good one Lisa. Well, for analytics you need data. I am going to say invest in partnerships. Partnerships in terms of using partners to grow, to using partnerships in terms of retention, and also help control costs. However, that partnership with virtual GPs for example. And with those partnerships, let's see what data we collect to better understand our customers. And then we'll hand it over to Lisa and her analytics team to provide more insights.

JAMES HAYBYRNE: Great. Well, thanks very much for your insights, guys. Lisa, Jess really insightful. Learned a lot, I think about innovation in the health insurance industry. And looking forward to seeing if your predictions pan out over the next couple of years. And thank you for everyone for tuning in and listening, and we'll see you on the next episode. Enjoy your rest of your day.

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