Innovating in Life & Health Insurance
Many thanks to Lisa Balboa, Head of Hannover Re’s global Life & Health Digital Business Accelerator, for speaking with Lorcán Hall for our blog. Lisa shared fascinating insights on how Hannover Re, the world’s third largest reinsurance company, and its global insurance clients are successfully innovating in the life and health insurance space.
Lisa’s views are relevant for a global audience, not only the InsurTech Ireland community. What we liked best about our discussion with Lisa is that she shared many real world examples to illustrate her points and shine a spotlight on ‘what great looks like.’ We can collectively accelerate our ambitions to grow the insurance market by borrowing from and building on others’ successes, and there is plenty of inspiration in this long-form interview.
Data- and digital-powered solutions, including AI tech., feature heavily. Technologies reduce the costs of production, making insurance more affordable to wider populations, particularly unserved and underserved groups. New technologies are also powering a growing portfolio of health and wellness solutions that help and encourage customers to introduce and sustain healthy behaviours. Plus, insurance companies are starting to leverage the advances in precision medicine to help customers treat and manage chronic illnesses. Lisa shares many examples of these innovations.
As we know, the COVID-19 pandemic exposed the fragilities in publicly funded healthcare systems. It was recently estimated that the annual global health protection gap is USD 940 billion while the annual mortality (death) protection gap is USD 414 billion. Staggering numbers. Private life & health insurance solutions have a critical role to play in plugging these protection gaps, complementing the efforts required to strengthen public healthcare and social protection systems.
Read this interview with Lisa if you want to understand how life & health insurance companies can play a greater role in societal resilience while also generating commercial value.
Introduction: Many thanks Lisa for agreeing to share your insights with the InsurTech Ireland community. Can we start please by asking you to introduce yourself and your global role at Hannover Re?
Many thanks for the invitation to share some insights with the InsurTech Ireland community.
I come from a background as a pricing actuary, and I’ve always had a passion for integrating new technologies into insurance - especially where these can help to expand insurance coverage for under-served or under-protected segments of society. In my role at Hannover Re, I am the Head of our global Life & Health Digital Business Accelerator (L&H DBA). We are living through exciting times where we’re experiencing a rapid pace of new medical and technological developments. The L&H DBA works closely with the colleagues in our local Hannover Re offices around the world to harness this innovation in a way that unlocks value across the life and health (L&H) insurance ecosystem for our insurance partners and their customers.
Digital Distribution: Let’s start with an easy question! We know that digitalisation has transformed the retail P&C space, disintermediating brokers over the past 10-15 years, but why hasn’t this impacted the distribution of life products in the same way?
It’s been very interesting to see the acceleration of digital distribution in the P&C space over the past few years. Early-on, many were optimistic about the potentials of direct digital distribution for L&H insurance. In practice though, in most markets (including many in Europe) we haven’t seen a widespread growth in sales through the direct, online distribution channel. In my view, one reason is the crucial role advisors play in the purchase of L&H products. Protection insurance products can be quite complex, and customers are keen to have the support of agents to help guide them to the product that is most appropriate for their financial needs. Due to the longer-term nature of many protection insurance products and the higher face-value amounts as compared to individual lines P&C products, customers may feel a greater need to undertake thorough research and engage in advice.
Despite the lower growth in online, direct to consumer sales for protection insurance, I am personally still optimistic about the role of digital in the sales process for L&H insurance. One emerging role is the way that digital can enable advisors to serve customers more effectively and efficiently. There’s encouraging growth in traction for a digitally-enabled advisor-based distribution approach, particularly in the US and in some markets in Asia.
Asia: You are spending a considerable amount of time in Asia. What Asian distribution learnings are there for other regions? And related to this, what challenges might European insurers face if they attempt to emulate Asian distribution practices?
I find the way digital is enabling advisors to meet customer needs an interesting distribution approach where there could be learnings for other regions. For example, the OMO (online-merge-offline) model that is becoming increasingly popular in some countries in Asia is an interesting one to learn from. OMO’s provide an insurance company with their own digital environment, whereby agents can connect directly with prospective customers via super-apps such as WeChat. Agents can efficiently build a relationship with potential customers, selecting from and tailoring a range of pre-set chat messages based on data insights. When a person shows a higher interest in purchasing insurance, this can triage them to a more time-intensive engagement with the agent including via chat, phone call or video call. Algorithms can also match customers with agents who are most effective at building relationships and meeting their needs. Based on this distribution model, one agent can efficiently build a relationship with thousands of prospective customers. Beyond the point of sale, the agents and customers can also use the platform for ongoing policy admin and claims servicing. They agent can continue to nurture the relationship and sell additional higher value insurance covers to the customer as the customer’s protection insurance needs evolve over time.
For insurers looking to adopt this sort of digital-first approach, whether that be in Asia, Europe or elsewhere in the globe, the regulatory environment including data protection legislation is important to understand for each country and each use case. It’s also important to understand whether and how the target demographic is engaging with social media platforms and super-apps. The appeal of this sort of distribution approach among both customers and advisors is important to validate before investing heavily in attempting to emulate this approach.
Digital Health & Wellness: Many insurers launched digital health and wellness solutions during the Covid-19 pandemic. It’s a broad question, but how have these innovations been received by customers and have insurers been able to charge a premium for these embedded innovations?
During the Covid-19 pandemic we increasingly saw digital health services such as remote doctors’ appointments being incorporated into L&H insurers’ propositions. There was also an increase in additional digital health services offered by insurers, such as mental health support apps. Broadly speaking, customers welcomed these innovations, and have continued to find them valuable where traditional health systems are under strain in the wake of Covid-19. From an insurance point of view, in many markets, services such as telehealth are now considered a “hygiene factor” for L&H insurers to offer. It’s therefore challenging for the insurer to charge additional premiums as a result of their offerings incorporating these services.
With that said, some insurers offering more holistic health and wellness offerings are seen as highly-valued market differentiators, achieving effective customer engagement. In terms of the future direction of these solutions, as we enter the era of personalisation, insurers looking to incorporate digital health and wellness solutions into their offerings may want to focus on targeting specific services to different customer segments. This can help to maximise the value added for customers and achieve greater cost-efficiencies for the insurer.
Another emerging trend is the role of the insurer in preventative healthcare and early-intervention approaches. The capabilities of technology are evolving to a point where smartphones and wearables are capable of monitoring people’s everyday health, including disease flagging for those who may have an undiagnosed health condition. If this technology can be directed towards high-risk customers, it can help them reduce their risk of disease and/or detect diseases such as heart disease and cancer at an earlier, less severe stage. This approach allows insurance customers to see tangible benefits from their insurer, in terms of supporting them to live healthier and longer. It may also deliver value to insurers by reducing the frequency and severity of claims. If the digital solution enables timely and effective medical interventions, then the claims saving may be sufficient to fund the cost of the digital solutions, rather than the insurer needing to fund this by charging an additional premium to the customer.
Genomics: Hannover Re has been exploring this space for several years, publishing papers, launching a solution in the South African market, and piloting the GenePlanet solution in the UK , but many insurers are still reluctant to deploy genomic solutions. Why is this?
Genetics offers incredible potential for personalised health insights, allowing individuals to make more informed lifestyle and healthcare decisions. However, due to its highly personal nature, some people may be hesitant to share their genetic information with private companies, including insurers and research institutions. From the insurer’s perspective, many insurers are often worried about anti-selection when it comes to genetic tests, as customers with higher genetic risks might take out insurance policies because of their greater perceived need for coverage. The complexity of offering genetic tests to insurance customers is further underscored by consumers’ concerns about insurers using genetic information to deny or alter the terms of coverage (despite there being restrictions on insurers using genetic data for underwriting or pricing in many markets). With genetic testing and precision medicine evolving at a rapid pace, insurers therefore face the daunting task of understanding whether and how to incorporate genetics into insurance.
Insurers who are successfully integrating genetic testing into insurance, are ensuring these tests are offered to policyholders together with appropriate healthcare support so that customers can take relevant action based on their test results. For example, one company successfully integrating genetics into insurance offerings is GenePlanet. GenePlanet provides insurance customers with a preventative service based on a genetic test, focused on health and lifestyle factors. Importantly, GenePlanet does not share any genetic data with insurers, and the test is usually provided post-policy issue to help avoid anti-selective purchase of insurance. This preventative healthcare service is delivered through a health app, which serves as a platform to engage customers. It helps them use their genetic insights for preventative actions to live a healthier and longer life. In Hannover Re’s pilot study with GenePlanet, we saw the potential for this sort of approach to help customers understand their health and to enable insurers to deliver preventative healthcare approaches for their customers.
As precision medicine develops, there’s also a growing opportunity for the use of genetic sequencing for more personalised medical treatment. For example, healthŌme, a partner of Hannover Re, leverages genomics to offer proactive health management services. These services help policyholders understand their hereditary cancer risk and how their bodies respond to medications. It also pairs these insights with the appropriate healthcare professional to interpret results and guide the policyholder's healthcare team on how to make this information actionable. For those policyholders diagnosed with cancer, healthŌme provides customers in the U.S. with access to oncology nurse navigation services and molecular diagnostic testing. The insights from the molecular diagnostic testing are provided in an actionable report to the patient's healthcare team, aiding in delivering the most targeted and appropriate cancer treatments, including assistance in accessing suitable clinical trials. In this way, we are starting to see genomics being integrated into insurance to facilitate opportunities for patients to access best-in-class treatments for conditions such as cancer. There are also synergies with protection insurance under such a product. For example, the insurer can provide lump sum payouts to help cover the financial impacts associated with cancer (such as time off work for treatment and recovery or money to pay for treatments that are authorised for use but are not provided under public or private health insurance coverage).
Data Analytics & AI: Of course, data analytics and AI continues to receive considerable attention, but we know that Hannover Re has been successfully deploying data analytics and AI for many years. The concept for hr | bluebox, one of your data analytics client services, was incubated alongside the InsurTech Ireland team at Dogpatch Labs in Dublin. Can you tell us how this work is progressing?
Data analytics applied to insurance is a combination of statistics, computer science and actuarial science. Data and analysis of data have always been a central foundation of the insurance business. More recently, data analytics and AI are unlocking new possibilities and opportunities right across the insurance value chain. This is driven by factors including more efficient infrastructure for data collection, storage and processing, as well as increased computational capacity. It’s worth emphasising that data analytics techniques can include traditional statistical models, in addition to more complex AI models. When talking about data analytics it’s important to differentiate between explainable models (e.g. generalised linear models and decision trees), from more “black box” AI models such as Generative AI.
Use cases for Generative AI models in the insurance sector are emerging in areas such as improving insurance distribution and customer engagement. For example, Generative AI is being used for optimisation and personalisation of insurance marketing on social media, which can enable a more effective and efficient distribution approach. When it comes to underwriting and claims, we may also see GenAI playing a role in augmenting underwriters’ and claims assessors’ capabilities, such as in document summarisation leading to faster case reviews. Undertaking robust testing and keeping the human in the loop for underwriting and claims decisions is likely to remain critically important in providing confidence to customers where this technology is deployed.
In terms of Hannover Re’s hr | bluebox personalised data analytics service, this is guided by the principle of explainable AI models, coupled with deep insurance domain knowledge. This combination is crucial and fundamental for insurers to ensure business steerability and long-term financial performance. hr | bluebox creates financial value for insurers through a mutually beneficial approach anchored on actionable recommendations to solve the specific business problems of our cedants. We’ve successfully supported insurers in using data analytics for a wide range of actionable business insights. Some examples include understanding policyholder behaviour, improving product offerings, supporting underwriting optimisation, and providing technical insights and model validation. The name “bluebox” is a testament to our commitment to transparency, and a deliberate alternative to the hidden workings of “black box” analytics solutions. By offering a customised service rather than a standardised software solution, we honour the individuality of different insurance markets, products and business needs of the insurance partners that we work with across the globe.
Sustainability: The private medical/health market has grown substantially since the pandemic exposed frailties in publicly funded healthcare systems, but the cost of living crisis means that many people cannot afford these products. How can insurers better support these and other vulnerable populations?
In the wake of the Covid-19 pandemic, people are increasingly placing a high value on their health. Despite the cost-of-living crisis in countries such as Ireland and the UK, data has not shown a large impact on persistency. This suggests that L&H insurance is still highly valued. Globally, some insurers are looking to introduce cheaper entry-level products to achieve growth among new target groups that may find more traditional insurance offerings unaffordable.
There’s also an increasing trend towards understanding co-morbidities in more detail and leveraging digital health data (such as electronic health records) to provide coverage to groups that may have previously found it challenging to obtain cover. Another opportunity is for employers to extend health insurance coverage to their employees. Due to the strain on publicly funded healthcare systems, providing private insurance to employees can be economically advantageous to employers, as it can help them avoid a rising financial burden from sickness absences where there may be delays in accessing public health system treatments.
The ageing population in many countries is also unlocking opportunities for insurers to design new products to cater for the diverse health and protection needs of this growing segment of society. When designing these products, it’s important to carefully consider the target population including their health needs and their financial protection gaps, together with a design that ensures the product is affordable and accessible to the end customer.
About Lisa Balboa
Lisa Balboa is Head of Hannover Re’s Life & Health Digital Business Accelerator, co-ordinating Hannover Re’s global innovation network dedicated to harnessing technological developments to unlock value across the L&H insurance ecosystem. Lisa is a qualified actuary and is passionate about championing innovation in health and life insurance. She is co-chair of the Institute and Faculty of Actuaries (IFoA) Mental Health Working Party and has also presented research for the IFoA on embedding wearable tech and predictive analytics into insurance.
About Hannover Re
Hannover Re is one of the world’s leading reinsurers. It transacts all lines of property & casualty and life & health reinsurance and is present worldwide with more than 3,500 staff. German business of the Hannover Re Group is written by the subsidiary E+S Rück. Established in 1966, Hannover Re is recognised as a reliable partner for innovative risk solutions, exceptional customer intimacy and financial soundness. The rating agencies most relevant to the insurance industry have awarded both Hannover Re and E+S Rück outstanding financial strength ratings: Standard & Poor's AA- "Very Strong" and A.M. Best A+ "Superior".
Find out more about insurance innovation on Hannover Re’s hr | equarium InsurTech innovation platform
hr l equarium is a marketplace that connects Hannover Re’s global insurance clients with InsurTech partners, providing access to diverse and innovative solutions across the entire value chain. Through hr | equarium, Hannover Re offers the insurance industry ready access to product and sales innovations, contributing to key competitive advantages for insurers meeting customer needs. Launched in 2019, hr | equarium was then extended to the entire insurance industry in 2022 and now offers almost 200 diverse InsurTech solutions including digital distribution, AI and analytics, wearables and sensors, and more. With over 800 clients from more than 110 countries, hr | equarium is a hub for global collaboration.
Find out more about Hannover Re’s hr | bluebox data analytics service
hr | bluebox is an innovative data analytics service that provides customised high-quality insights into portfolio data. It combines advanced analytics with a deep understanding of the insurance industry to help businesses make informed decisions about current steering and future opportunities. Leveraging explainable machine learning, hr | bluebox helps insurers optimise their underwriting processes, improve customer engagement, and enhance risk assessment capabilities.
About GenePlanet
GenePlanet, founded in 2008, is the leading European provider of preventative genetic tests specialising in NIPT, cancer screening, and lifestyle DNA tests. Operating in over 30 countries worldwide, the company collaborates with more than 4,000 medical partners, business partners, and insurance companies, providing top-quality tests based on the latest scientific discoveries. Recognised as one of the best biotech startups in CEE and among 1,000 fastest-growing companies in the EU by the Financial Times, as well as one of the Top 35 EU Unicorns by the European Commission, GenePlanet continues to empower individuals to take control of their health.
About healthŌme
healthŌme, Inc. is a genomics-based, precision health navigation company operating at the intersection of life insurance, life science, and health management. With a fully integrated, in-house genetics lab, healthŌme is dedicated to simplifying and accelerating access to technologies and services that can dramatically alter an individual’s health trajectory, with an initial focus on cancer. healthŌme, in partnership with Hannover Re US, the reinsurer for healthŌme’s first-of-its-kind cancer management program, designs and delivers tech-enabled, precision health management solutions through a network of life and critical illness insurance carriers. To learn more, visit www.healthome.com, and stay connected with healthŌme on LinkedIn.