Issue: October 2019 | L/H
General Industry | EnglishBy Bhavesh Bhudia, Life/Health Actuarial
Associate, London
Modern smartphones have given us access to
greater computing power than the computers that placed the first two men on the
moon in 1969. This growth in digital power at our fingertips has led to the
rapid advancement of mobile health applications, commonly abbreviated to
mHealth, which allows users to seamlessly manage their health
and lifestyle.
mHealth applications have the potential to
expand the market for Critical Illness insurance by appealing to a wider range
of users and to provide insurers with additional marketing opportunities. The
most obvious method could be to encourage existing users to integrate the
technology with Critical Illness policies. Such a development could present
challenges to the model currently used in the market for Critical Illness.
In the short-term, insurers face the test of
finding cost-effective solutions to encourage the use of mHealth applications
to monitor, communicate, and integrate with Critical Illness plans. This burden
has not fallen entirely on the shoulders of insurers. Developers have taken the
first step, with Apple and Stanford University creating the Heart Study App
using the Apple Watch to monitor irregular heartbeats and notify users of heart
attacks that the user may have had - with cases of lives already being saved.1
Over-reliance on mHealth applications to monitor
the health and lifestyle of users, or to verify claims, could be problematic
for insurers, however. For example, mHealth applications could make a wrong
diagnosis, or not be entirely reliable, which could potentially
harm users.
How mHealth
applications could impact Critical Illness insurance marketing
The use of mHealth applications as part of
policy design could help expand the market for Critical Illness by
incentivising a customer base to take up policies where these customers would
traditionally have no interest in obtaining Critical Illness cover, such as
millennials. This development brings the additional benefit of encouraging
expansion into a typically healthier segment of policyholders, allowing for a
self-selecting pool of lives to be insured, as well as allowing for policies to
be created to closely match consumers’ needs.
mHealth applications can help to shape the
future of Critical Illness insurance distribution, by using the idea of “easy
onboarding”, which encourages the take-up of Critical Illness through a simpler
underwriting and application process. By accessing medical and health-related
data via a policyholder’s device, the insurer can simplify the underwriting
process. Certain health questions can be eliminated and instead be verified by
the mHealth applications, being used either as a substitute, or as a complement
to traditional disclosures and evidence.
However, much of the success of integrating
mHealth applications with underwriting depends on the policyholder’s
willingness to share his or her their data with insurers, as well as
reinsurers, and agreeing what data can be useful to predict risk as a
substitute for traditional underwriting disclosures and evidence. A survey
found that only 53% of people would trust mHealth applications to help with
their finances.2 Growth in the adoption of mHealth applications
could be hindered by a general distrust of insurers, with concerns surrounding
the use and storage of personal medical data. On the other hand, mHealth
applications could bridge this gap as consumers and insurers will have access
to the same data – creating transparency between policyholders
and insurers.
The aim from an insurer’s point of view would be
to create value for the policyholder by improving the financial benefits of
cover, coupled with encouraging the policyholder to improve their general
well-being.
mHealth applications are built around not
needing specialist medical equipment or training to monitor health; they are
designed with simplicity being the appealing factor. This is something mHealth-
integrated Critical Illness policies should consider – in essence, they should
also reflect the same level of simplicity in product design and avoid
unnecessary and unsustainable features.
Insurers should still consider the trade-off
between simplicity and reliability. Insurers may not have enough data to develop
applications independently, which would reduce reliability or limit the
applications they can build. Having less reliable applications could mean that
information may not be as accurate as intended, which could lead to
reputational damage.
In most cases, the benefits gained from
implementing mHealth applications and Critical Illness cover will be measured
differently by the policyholder and the insurer. Policyholders could benefit
from potentially cheaper premiums, a faster application process and tailored
policies; while insurers would see benefits in refined risk pricing and the
improved ability to monitor the portfolio over time.
Insurers may also be concerned about
policyholders losing interest in using mHealth applications over the term of
the policy. Application developers and insurers would need to encourage
continued interest in the application over the long term. Insurers could
implement “gamification” elements to prolong use, as well as updating and
adding new features to keep policyholders interested. This is possible because
as technology improves, a wider array of policyholder health indicators could
be measured.
Insurers cannot guarantee that mHealth
applications will be popular, and so might not be able to justify tying health
data to Critical Illness policies over the long-term. Insurers may further be
discouraged by the cost of implementing and changing policy design against the
benefits gained, particularly if the take-up rate of policies is low.
Insurers could encourage policyholders to take a
long-term view on improving health by using targets that are achievable for the
policyholder and based on their levels of activity rather than by setting a
blanket goal, increasing the attractiveness of the product in the market. An
example would be the use of the PAI, a health application which uses data
collected by wearable devices to measure the user’s heart rate and oxygen take
up during intense exercise. The algorithm provides the user with a score based
on the intensity of the user’s activity, and how much that activity has
increased their heart rate relative to the heart’s resting state. The aim of
the algorithm is to improve the cardiovascular health of the user, which can
reduce the risk of a heart attack.3 This would have the effect
of reducing heart attack Critical Illness claims and encouraging the
policyholder to use the application over the longer term, as the algorithm is
not limited to a single type of device.
How insurers respond will depend on their own
risk appetite. This could range from slowly phasing in policies that complement
mHealth applications, to a more cautious approach of only offering mHealth
based policies to consumers who have already built up enough medical data –
which will also help combat anti-selection.
Collection and analysis of data will allow the
insurer to tailor and enhance cover to create value for policyholders.
Policyholders who live healthier lifestyles could have access to other life
insurance products with minimal or no underwriting. Insurers would see lower
lapse rates as policyholders are able to get the most value out of their
policies and insure a healthy pool of lives.
Clear policy wording could explain that premiums
may increase if the policyholder’s lifestyle changes. To avoid concerns of
unfairly treating customers, insurers could cap maximum premiums paid by the
policyholder – perhaps at the same rate as a standard policy.
The effects of mHealth
applications on underwriting
The use of mHealth applications could introduce
an element of uncertainty for carriers as technology could develop at a faster
rate than underwriting improvements. This risk is increased for the insurer
when policies that depend on mobile data are sold with guarantees. Insurers
would therefore need to be wary about future proofing their policies.
Given a typical Critical Illness policy could be
taken out with an initial term of over a decade, it would be unreasonable to
base a long-term policy on current technology. Policies should therefore be
designed with changing technology in mind. The first iPhone was released just
12 years ago, a point at which medical applications had no real online
presence or platform. Applications created 12 years ago would be too basic
to merit any use with insurance today.
To forecast what digital advancements will occur
over the next 20 years and how they might be used to improve a user’s
health would be largely guesswork. Insurers could future-proof policies by
having options to convert them into a standard policy in case developments in
clinical diagnosis and treatments continuously outpace the definitions adopted
by insurers. This option will also help to reduce policy lapses if
policyholders are no longer able to use chosen applications (i.e. due
to injury).
As the policy continues through its lifespan,
underwriting could be updated as the health and lifestyle of the policyholder
changes, allowing healthy policyholders to maintain discounts or benefit from
further reduced premiums – a challenge to the traditional pooling pricing
model. Insurers and policyholders alike should also consider the reverse
scenario, where a worsening lifestyle of the policyholder once covered may lead
to more unfavourable premiums than the policyholder would have expected. To
treat the customer fairly this should be explained when the policy is taken
out. Insurers could take the first step with product design and offer policies
with a maximum guaranteed premium or require mHealth data to be input at an
earlier stage in the underwriting process to avoid charging potentially higher
premiums.
Anti-selection could be a concern if the insurer
is not able to underwrite to an adequate standard using the policyholder’s
accumulated medical data, nor rely entirely on mHealth data to substitute
traditional underwriting. In this scenario, policyholders could select against
the insurer and seek cover when they experience a deterioration in health and
are responsible for inputting their own data. The reliability of mHealth
applications here can help to prevent potential anti-selection. Since no single
mHealth application will be responsible for monitoring all aspects of the
user’s health, it’s possible that there could be limited scope for such
applications to replace traditional underwriting.
The impact of mHealth
applications on Critical Illness claims
The use of mHealth applications could allow for
the detection of illnesses at an earlier stage, or the detection of less
serious conditions. Over time policyholders could see a deterioration in their
health when tracked using mHealth applications. By notifying the policyholder
and prompting them to take corrective measures or seek medical attention at an
earlier stage than otherwise, an mHealth application could ultimately prevent
medical conditions progressing into serious illnesses.
The “Heart Study App” developed for the Apple
Watch has already saved the lives of some of its users.4
The potential for mHealth applications to allow
the policyholder to self-diagnose conditions is taken a step further with
applications such as “GP at hand”, where consumers access video consultations
with GPs.5
As the capability of applications to
self-diagnose increases, earlier detection of diseases becomes possible,
translating into earlier than expected claims experience. The effect may not be
so pronounced since these applications are most often used to diagnose less
severe conditions, so would not be classed as a “Critical Illness” or meet the
claims definitions of the policy. But insurers should monitor self-diagnostic
technology developments as it becomes more capable of measuring complex
health metrics.
Insurers who are optimistic about the future of
Critical Illness and mHealth but want to combat the risk of misdiagnosis should
create and thoroughly vet applications with developers, tailoring applications
to work specifically with Critical Illness plans – eliminating unnecessary
features of application design. This will depend on the application
individually and whether medical health professionals are responsible for
diagnosing users if mobile consultations are used, or the algorithms of the
application are responsible.
A study into acute care in hospitals in the UK
found that 1 in 10 patients are injured or killed because of medical
errors or institutional shortcomings.6 A lack of physical
interaction, with the example of video consultations, may increase the rate of
misdiagnosis. Thus, the use of applications without an insurer’s approval may
see an increase in incidence rates for serious illnesses. As a result, insurers
would need to thoroughly vet applications before they can be implemented
alongside policy design. Perhaps the best way insurers can avoid this risk is
by developing their own applications that they can update, allowing for changes
in claim definitions as the market for Critical Illness develops.
Conclusion
The possible product innovations that could be
generated from mHealth applications undoubtedly create an opportunity for
insurers. Insurers who will naturally gain will be those that are interested in
changing product design and finding new markets and are willing to overcome the
hurdles of launching policies integrated with adaptable technology.
We know the capability of accessible technology
is improving within an industry which is already moving in the right direction,
but it will still take time to adopt as attitudes to the use of collected
medical data change across demographics. As consumers become more aware of the
benefits of sharing data with life insurers, the challenges surrounding the
adoption of digitally integrated insurance policies reduces.
The solution would not completely replace
medical underwriting but would rather complement traditional underwriting using
data collected from applications. A solution that relies solely on the use of
mHealth applications as a viable alternative to underwriting is still some
distance away.
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