Private health insurers should innovate, instead of rent-seek

Disturbingly, the Australian private health insurance industry is in the doldrums. Young people are less likely to take up private health insurance.

The main factor in this is the excellent quality healthcare that all Australians pay for through taxes. The quality is so high, and the direct costs are so low (almost 100% taxpayer subsidised in so many instances), that people rightly think: “Why buy private”? The value proposition isn’t clear.

Sadly, instead of pursuing an innovation pathway – and trying to truly improve the service offering, private health insurers are playing a price/distribution policy argument, running to Canberra for a solution.

Private Healthcare Australia, the advocacy body for the private health insurers, is pursuing an argument in favour of having employers buy private health insurance on behalf of employees. They’re trying to fight a collective price battle, instead of a value battle. The two are not identical.

The opportunities for Private Health Insurers (PHI)s are immense, and yet so few seem to be grasping the opportunity, so few seem to be looking at digital innovation in an effort to provide better service.

Better marketing = Better growth for Private Health Insurance

There are no distinctive and memorable PHI brands. Most have contravened marketing science and best practice by focussing on conversion/activation style marketing, rather than brand building. They simply battle each other at rate rise time using ever more expensive tactical campaigns, rather than using distinctive brand building over 365 days to increase unprompted awareness and thereby lower the cost of “conversion campaigns”, eg: CPC, CPA, and other tactical metrics.

As a result of their lack of distinctiveness and poor go-to-market approaches, most PHIs get beaten to the consumer by aggregators such as CompareTheMarket, iSelect, Kogan and others, who take the poorly marketed and poorly distributed PHI product, wrap it in a simple digital user experience, make some memorable ads that run 365 days a year and sell it to a LOT of consumers. These aggregators thereby take a huge chunk of the market and a huge chunk of the profitability of PHIs in the process. What value do the aggregators add? Very little aside from slightly better mental and physical availability.

Concierge Medicine can transform Private Health Insurance

Further, PHIs are slow to react when it comes to using digital and data to provide new medical products and services. In particular, there is no evidence of “Concierge Medicine” having been explored in Australia. This brilliant concept looks at a “retainer” (possibly via private health insurance) for the provision of regular medical services in the hope that having people regularly using a variety of medical services even while in good health will – in the long run – prevent serious or chronic illness.

For example, buying a subscription of four visits to the doctor per year which may include blood tests, vaccinations, general health checkups and data collection, may spot issues or prevent illness well before anything occurs. This may then lead to less expensive remedies, leading to less burden on health insurers.

Data is the key.

Further, a consumer benefit isn’t just about staying well, but about providing data-driven insights and suggestions to provide better 24-hour health optimisation. From DNA-based advice on how to best eat or exercise, all the way through to providing smart devices such as Apple Watches in order to track people’s sleep, eating, heart rate, stress levels and other precursors to general health.

PHI should be the central concierge that gathers data in order to better diagnose or prevent health issues, and suggesting or providing products and services to better activate health: data collection devices, cheaper gym memberships, discounted quality bedding, healthy grocery discounts and gamification of everyday exercises by nudging people into healthier habits, eg: walking up the stairs instead of taking the lift.

Network effects are possible.

Further, there might be network effects built into this shift in the PHI business model. By having families signed up, or friendship groups, or even – having work colleagues signed up, there’s an encouragement of group health and wellbeing activities. Group visits to the doctor to be vaccinated. Group visits to the gym. Group walks around the park. Improving family shopping and eating habits. Cheaper insurance if there’s a “buddy” system of encouraging healthier activities amongst social networks.

PHI operators need to redefine their role and redefine their competitive set in the modern world. Are they competing against public health care with these latest pleas to Government? Or might they look at a new way of operating – as an always-on subscription service to ensure a longer, healthier and happier life? That may be a way to add real value.

Because currently, their push for collective buying through employers is an unimaginative, unpopular, lazy and unsustainable way of growing market share.

Source: Sickie insurance: push for the boss to cover worker healthcare

Constantine Frantzeskos

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