by Daniel Yap
THE focus of insurers has traditionally been on offering customers financial protection against unexpected life events such as illnesses. With good risk management and underwriting processes in place, it is generally sustainable for insurers to continue offering compelling insurance products that meet their customers’ protection needs.
But in this age of great convenience enabled by technology and with the ever-expanding food choices, it is becoming increasingly challenging for insurers to support the growing financial needs of their customers as a result of their unhealthy, sedentary lifestyle.
An insurer ultimately has a stake in its customers’ health, and they need to find a way to influence their customers’ lifestyle choices in order to stay ahead of the spiralling healthcare costs and ensure their long term sustainability.
How then can an insurer encourage healthy behaviours?
The human mind is wired to miscalculate decisions about long- and short-term gains (we explained it all here), like eating healthy or driving safely, are stymied by hyperbolic discounting and other types of short-term thinking. No Claim Discount for motor insurance, for example, don’t always account for the risks that others take since you only lose your discount after an accident occurs.
Discount programmes that some companies offer for healthy lifestyle choices are common, but these compete with other discount programmes from retailers or dining clubs that are designed to tempt you in the opposite direction.
But what if there was a more effective way to motivate healthy behaviours? AIA Vitality, for example, is one such attempt to help each party get the most out of their insurance – customers who upkeep a healthy lifestyle receive a variety of rewards as well as premium discounts, while those who have been less healthy would be motivated to move towards the same direction. The insurance company, on the other hand, can continue to offer customers adequate protection at affordable premiums.
The key is how AIA Vitality leverages science and technology to drive positive behavioural change by employing comprehensive tools to assess each member’s health and make tailored recommendations to help them become healthier. It also makes use of the principles of behavioural science and rewards members who are on track to becoming healthier.
The problem of hyperbolic discounting is also addressed more effectively – people tempted to veg on the sofa are given a very realistic weekly activity challenge (such as clocking 7,500 steps a day or checking in at the gym) to meet for a reward of a $5 voucher, which alone more than offsets the $3-a-month cost of being on the programme. The company partners with supermarket chain Cold Storage to offer cash back rewards worth up to $160 each month for healthy food items. Add to that a range of discounts and tie-ups with healthy partners and you have a much more holistic approach for tackling unhealthy living.
But why would an insurer give you $5 a week and more for something that you only pay $3 a month for? That’s because this method has proven to be a win-win for all – a study on Vitality members found that those who engaged in the programme were less likely to fall sick or be hospitalised for prolonged illnesses, resulting in an overall 14 per cent lower cost per hospitalised patient.
Those who ranked higher in the Vitality programme which divides members into Bronze, Silver and Gold statuses, saw a lower mortality rate in practically every age group. It’s a data-driven system that has been fine-tuned to benefit all participants.
Everyone gets what they want – customers enjoy rewards when they meet their health goals and pay less for their insurance as they become healthier. AIA Singapore, on the other hand, gains from healthier customers who will help to ensure that insurance remains affordable for all.
The end result is a more effective model than simply offering financial protection- by driving behavioural and lifestyle change, insurers like AIA Singapore are now able to keep their customers healthier, lower premium costs and stay sustainable in the long run: what the company calls “shared value for health”.
Featured image from TMG file.
This story is part of a series with AIA Singapore.
AIA Singapore is invested in the health and wellness of Singaporeans and has launched AIA Vitality, a comprehensive wellness programme that rewards members for taking small, everyday steps to improve their health.