Equinox Consulting

Analysis – Connected health: Trojan horse or authentic opportunity for insurers?

David Pimentel at 2015-07-27 in Décryptage

100,000

number of mobile applications dedicated to health in 2013

2 billion connected devices, 30 materials of this type per household on an average, for an annual market valued at 74 billion euros…. Welcome to the connected France of 2020

If connected devices, strictly speaking, are not new, the technology and marketing improvements tend to facilitate their distribution and transform our everyday needs. In a country of supporters of antibiotics and anti-depressant consumption, « Connected health » is among the top new trends and seems destined for a great future.

Although it does not offer a true shift, it promises some significant changes for consumers, and much more.

Innovations, proliferation of personal data, new sales opportunities… if connected health strongly interests health insurers for their potential, it could also enable new players to expand on this market…

 For a better understanding of oneself… and of others

The promise of a better life is thus here, at your fingertips or even already on your wrist. Soon, when someone asks you for the time, you might reply « I feel great, thank you”.

From vital function measurement to self-diagnosis, connected health pursues two complementary objectives: telemedicine and well-being. From the connected pillbox to the « Dreem » headband enhancing cognitive performance during sleep, the options for tomorrow are vast.

If the technical and material aspects of innovation are still the most visible, focus should be given to applications to identify the source of added value: the ability to collect, process and share information wisely.

For instance, the French start-up company Greenpred is betting on an algorithm capable of predicting diseases… yeah, that’s right!

No need to await such a strong indicator to understand the market potential. The increasing number of health/well-being applications available on the market is a testimony in itself: from 20,000 2 years ago, they have exceeded 100,000 last year, an indicator of the progressive change in our life styles.

These new tools – and new applications – also bring along their share of debates. Since the use of these devices requires data creation, what about property rights and their use for commercial purposes?

Santé connectée 1Source : Bracelet Fitbit HR

A new means of differentiation for insurers?

In the age of « communicating » devices, customer data is most often held by the manufacturers of the innovation, as for Apple and its Healthkit service, which the comic duo Omar and Fred had promoted, or for Samsung and its SAMI platform.

As a matter of fact, the value of this data has not escaped health insurers, especially because an extensive use could enable to:

  • Refine product pricing per customer, to the extent that such a practice is referred as « micro-pricing ».
  • Reduce the claim rate by implementing targeted prevention policies
  • Create new drivers of diversification by offering differentiating health and well-being coaching services.

These points are particularly instrumental in gaining market shares on the health insurance market: the low product differentiation and their high interchangeability lead to a price war among insurers.

Offering cheaper (micro-pricing) and different (differentiation) is thus a precious asset for positioning.

From theory to practice: a giant step

The insurers John Hancock (USA) and AXA (France) appear as pioneers in the use of healthcare data.

Santé connectée 2They were the first ones to pair complementary health insurance with a connected wristband (Fitbit and Withings respectively), which enable the insured to reduce her/his contributions (John Hancock) or to obtain gift cheques (AXA) based on the level of physical activity practised.

This approach is made effective by encouraging physical exercise and allowing at the same time to reduce the claim rate, not to mention the publicity stunt…!

While the use potential exists, it should however be noted that the ability to collect and process data remains dependent on a partner (Fitbit, Withings), and the ability to create added value through this data is for the moment totally non-existent…

It is this last point which is the most problematic: its implementation is complex. First because insurers have no or little know-how in this regard, then because the internalisation of such capabilities requires agreeing to huge investments for still uncertain profits.

Although connected health gives hope for new perspectives for health insurers, the reality however shows the risk of a growing dependence on new players, or even the emergence of new challengers…

When the wolf is invited into the fold

Unlike insurers, the GAFA (Google, Apple, Facebook, Amazon) has the key resources to take position on this new market: holding of information, capacity to generate value from this information, proximity with consumers and customer trust could turn them into fierce competitors, or to a lesser extent, indispensable partners.

For example, Google has attempted to penetrate the insurance market multiple times, through the introduction of online insurance comparison tools (UK, France, USA).

Although the success of these initiatives is for the moment moderated, a Google-esque success, such as only the firm could achieve, and would be one more step towards the burst of the distribution chain, and thus of margins…!

The pairing of health insurance with connected devices can thus lead to interesting perspectives for the insurers, provided that they are in the front line.

Failing that, these innovations could allow new competitors to gain a foothold in the market and why not, use a connected device as a distribution channel, and thus relegate the insurer to its former role: a simple financial service provider…

 

Plus :

  • Dreem band presentation  link
  • Connected pillbox link
  • Why insurance companies dream about connected objects, Sciences & Prospectives link

 

David PIMENTEL   David PIMENTEL

Consultant

Insurance

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