Many insurance providers are integrating a novel approach into their policy structures. The system rewards positive behavior that leads to less health care usage, but it comes at a price. A Bernstein report notes that certain customers are eager to grasp at the rewards but some question giving up their privacy to do so. It all appears to fall in line with the thoughts of behavioral economics expert Richard Thaler, who had recommended an insurance system overall that rewards people for positive behavior.
Incentivize people to use less health care
University of Chicago professor Richard Thaler notes that when selecting health care insurance providers, people tend to choose the most expensive coverage.
That’s exactly the wrong approach. He says most people would be better off with a high deductible and not using health care except when necessary. “Best coverage” often means a low deductible with a wide array of coverage most people will never use, but this is the choice because it is perceived as “best.”
Insurance providers are, likewise, attempting to incentivize their policyholders to engage in positive behaviors that reduce the use of healthcare and future claims.
In a September 15 Global Financials Blast, Bernstein’s Linda Sun-Mattison notes that healthy behavior is one way to achieve additional benefits from insurance providers, but there is a cost.
Insurance providers - Engage in healthy behavior and give up privacy to get rewards: privacy now a "luxury"
There is a humorous insurance commercial running in the UK: a sausage dog bemoans to the camera about how his suddenly health conscious owner now takes him on long jogs.
The ad for Vitality encourages users to engage in healthy behavior and is part of a growing trend. insurance providers are offering rewards programs for policy holders who engage in behavior likely to lead to fewer claims. Vitality, for instance, offers deep discounts for customers who engage in healthy behavior and take out a long-term policy.
But there are catches.
In order to obtain what is a 19% discount to the lowest price insurance quote, users are required to join a wellness program that comes with a monthly charge and take regular health check-ups, vaccinations, stays active, and generally live a healthy life.
For each positive and healthy activity, such as taking a health checkup or staying active, policy holders receive points much like they would for a traditional consumer rewards program. The points are used to coupons on coffee, movie tickets or a deduction on the insurance premiums.
And here is where a major caveat exists.
Users must also grant access to the insurance providers into the intimate steps involved in daily life. This loss of privacy was a bridge too far for Sun-Mattison, but others, particularly millennials, don’t have the same issues.
To obtain the rewards, Vitality required Sun-Mattison to download an application to her cell phone that tracked her everyday movements – even when she turned off the phone. After tracking her every move, even on long-haul flights, she decided it wasn’t worth the privacy invasion and ditched the application and potential rewards.
Others don’t have that same problem.
In China, over 600,000 users signed up for the application. “The concept of privacy is still relatively foreign to many Asian countries,” she pointed out. This is a region where only 50% of people in a recent survey said they were concerned about privacy. Compare this to 83% of US residents who said they were concerned with privacy in the 2013 BCG "Global Consumer Sentiment Survey.”
Sun-Mattison notes that younger people are also less concerned with privacy loss, as well as blue-collar workers. “Privacy can be thought of as a ‘luxury’ that comes only after basic needs are met,” she wrote.