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Health Insurance Premium for Healthy people should cost zero!!!


Summary

health people insurance

Imagine you are a healthy adult of forty. You exercise regularly, and work hard towards maintaining a healthy lifestyle, despite your demanding work schedule. Do you ever wonder why you have to bear the same premium as someone who smokes, leads a sedentary lifestyle and doesn’t believe in the idea of exercising?

Well, the good news is, very soon, your healthy lifestyle could lead to cheaper premiums on your health insurance policy.

We seem to be headed to the inflection point where technology integrates with insurance to yield better architecture for the insurance industry. Of late there’s a renewed thrust towards adoption of technology by the insurance industry in India.

  1. Data, the hot currency of the date – Your smart watch keeps track of your daily activity – your sleep cycle, deep sleep, counts your steps, the amount of time you sit at one place, your resting heart rate; among other things. Enabling secure integration & transmission of this data with an insurer will give them the requisite information to underwrite your health risk and it will give you the leverage to bargain for a better price.
  2. Wellness programming – is the active thrust towards maintaining a healthy lifestyle. Companies are slowly realising the fact that a small portion of their expenditure on employee wellness could lead to dramatic savings on health claim expenditure. Wellness is today the buzzword in Human Resource conferences.
  3. Moral hazard in insurance is defined as the risk that the Insured would not act in the best interest in preserving an asset should they not be insured. Smart cars enable active data management for their users – cars can now prompt when you are speeding, when other cars are too close, how you have driven over the last one month, and a whole lot of other intelligent information, that is of immense use while underwriting risks. Motor insurance is already exchanging data with Regional Traffic Offices for authentication of vehicle ownership. We would soon see integration of platforms for facilitation of data to Insurers that would help them underwrite risks in a data-driven manner. This in turn would bring down your premiums if you are a consistently good driver.
  4. Bancassurance enables integration of banks’ systems with insurance companies to facilitate better reach. Earlier banks could tie up with single insurers for selling policies, but the introduction of open architecture in 2017 has enabled banks to tie up with multiple insurers, thereby increasing competition amongst insurers. This competition in turn has led to an innovative marketplace and service par excellence. Products are being designed to cater to niches. The Customer in turn has a wide variety of service providers to choose from.
  5. Blockchain is a distributed database system that is secure and decentralized. Smart contracts, one of the add-on features of blockchain technology, promise to cut a lot of redundancies from the system, without compromising on security, thereby reducing costs for the end user, the Customer.

Imagine a friend who has a mediclaim policy for Rs. 2 Lakh and a top up policy with a Sum Insured of Rs. 4 Lakh. He unfortunately meets with an accident and is hospitalized; you, being a close friend are entrusted with the running around for coordination of various stakeholders – the base policy Insurer, base policy TPA, the top up policy Insurer, top up policy TPA, the hospital. Wouldn’t it come as a surprise to you if all of the execution of transitioning from the base policy to the top up happens without any human intervention? That is precisely what smart contracts are written for.

One of the reasons WhatsApp has managed to reach more people than banks today is the simplicity of the platform which makes it easy to use; people, especially in the rural areas, might not have a bank account, but patronize WhatsApp. The success of technology lies in its ability to cater to the lowest common denominator, not the smartest one. That in turn is dependent on the technology being widespread – more the number of people using the technology, greater the cash flow into the system, more the innovation, deeper the reach.

While these are early days, we could soon see the introduction of hybrid products that either give people a discount on insurance premiums for maintaining a healthy lifestyle or  subsidize costs for other products – Gyms could subsidize premiums for healthier people.

So, if you are finding it hard to keep your new year’s resolution intact, chin up man, it could save you some money – hang in there till technology finds a way.

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Susheel Agarwal

Namaste. I'm Abhinay Nedunuru, a Fellow of the Insurance Institute of India with a passion to make insurance simple and crisp. I write mostly on insurance and investment. I have a passion for teaching and training in particular to insurance. I'm currently doing my PhD from IIM in Marketing Management.