Employees have received a raw deal on health insurance for decades. Covid-19 is a time for change, argues Trevor Davis, Instanda managing director for life and health.
“I’m getting it for so cheap it’s like water” is not a statement you would commonly associate with health insurance. It was a remark made by the President of the US in the first electoral debate, referring to the price of insulin. The statement sparked controversy. But it raises an important question for the UK. If health insurance is as important to our health as water, why is it considerably more expensive and equally less transparent?
As the economic fallout from Covid-19 continues, insurers need to act urgently to prevent an affordability crisis in health insurance. It will require a concerted effort from employers and the industry. More than that, it will require the embrace of technology. But when change comes, it will expose the raw deal consumers have had on health insurance for decades.
The decline of health insurance
The Institute for Employment Studies estimates that employers in Britain are planning more than twice as many redundancies than they did at the height of the last recession. That is bad news for everyone.
Only 13% of people in the UK have private healthcare. But a much larger percentage has access to that care, as a result of their health insurance from their employer.
As millions become unemployed, or have reduced income, they will lose that access. The result of this is that big carriers will see companies cancelling their cover, as employees prefer money in their pockets at the end of the month.
Something must be wrong if swathes of employees are cancelling their health insurance cover when we’re in the midst of a century defining health crisis. Why? Because health insurance is certainly not as cheap, or as easy to turn on or off, as water.
Solving the affordability problem
The question insurers will subsequently grapple with as we emerge from this crisis is, how do we make health insurance affordable?
During the pandemic, and to their credit, employers have increased their interest in their employees’ health and wellbeing. This has been long-overdue.
For decades, employees have found health insurance provided by their employees to be murky. A fit thirty-year-old is right to ask, do I really need to pay this level of premium, compared to a 55-year-old colleague who asks; can I afford it? In an age of open banking, customer segmentation, and artificial intelligence capability we can no longer expect consumers to accept such broad brush policies.
Technology is the solution
As we emerge from Covid-19, when pay is squeezed but need for healthcare and insurance is higher, a system change is urgently needed.
One promising sign is that more employers are embracing flexible solutions. Where employees can choose month to month the insurance they need, rather like a subscription model. These policies can be personalised further by integrating wearables and telematics. The result, personalised policies where employees pay less and only for what they need.
But there is something standing in the way: insurers’ technology systems. They are so out of date that providing cover along the lines of the above seems inconceivable to some. With their existing legacy systems, incumbents can’t employ things like customer segmentation or make use of the AI capabilities that have been embraced in open banking.
The reality is, however, that the technology to allow insurers to embrace this is already here.
Health insurance can be like water
Covid-19 has altered society significantly. Consumers have been hit and the pressure is now on insurance companies to keep up with the change. Affordability is and must be the future.
It is a shame it has taken a global pandemic for many in the industry to recognise this. But it is possible the industry can make health insurance at least a little bit more like water. Where you turn it on and off when you need it. It’s transparent and keeps you healthy. And, of course, is reasonably priced.
Article by Trevor Davis, MD of Life & Health at INSTANDA. Published in Insurance POST on 10th Dec 2020