As well synthesized by Meg Whitman (CEO at Hewlett-Packard) “we’re now living in an Idea Economy, where the ability to turn an idea into a new product or service has never been easier”. This impact is pervasive on all industries, any company has to achieve enough agility to respond to market opportunities and threats and quickly turn ideas into reality. For some years now, the “digital”-driven projects have become a priority for all the Insurance Groups. Let me add that here the term “digital” refers to several important aspects starting with a digitalized customer experience, which is completed by digital/technological processes aimed at improving the relationship with the clients and with the mid-term objective of maximizing the single client’s profitability. Insurers are beginning - and those who are not doing so should start – to give serious thought to how they can build their strategy to incorporate the IoT into the insurance value chain. The Internet of Things (IoT) is “the interconnection via the Internet of computing devices embedded in everyday objects, enabling them to send and receive data.” The most important factor in the IoT “equation” is the data – which is the main element providing value to the insurance company if harvested and analyzed in an adequate manner. In product development there should be a data collection & analysis approach embedded in the business model itself, otherwise the strategy will lack in bringing the desired added value. Having a “data mindset” in all the stages of the business will ensure that the implemented model will have the capacity to gather and analyze the high quantity of data provided by the interconnected devices and environments. As Matteo Carbone who is an expert in the field says in his article, ultimately telematics is the integrated use of informatics and telecommunications; it is about registering, storing and analyzing data via telecommunication devices. “Telematics could be one of the most relevant digital innovations in the insurance industry directly impacting the technical results. Due to the pervasive diffusion of the Internet of Everything, this approach could be extended from motor insurance to other insurance businesses.”

1. The integration of technology in the Insurance Company’s value proposition is
turning out to be one of the main evolutionary trends of the sector
By Andrea Silvello
As well synthesized by Meg Whitman (CEO at Hewlett-Packard) “we’re now living in an Idea Economy, where the
ability to turn an idea into a new product or service has never been easier”. This impact is pervasive on all industries,
any company has to achieve enough agility to respond to market opportunities and threats and quickly turn ideas
into reality.
For some years now, the “digital”-driven projects have become a priority for all the Insurance Groups. Let me add
that here the term “digital” refers to several important aspects starting with a digitalized customer experience,
which is completed by digital/technological processes aimed at improving the relationship with the clients and with
the mid-term objective of maximizing the single client’s profitability.
Insurers are beginning - and those who are not doing so should start – to give serious thought to how they can build
their strategy to incorporate the IoT into the insurance value chain.
The Internet of Things (IoT) is “the interconnection via the Internet of computing devices embedded in everyday
objects, enabling them to send and receive data.” The most important factor in the IoT “equation” is the data –
which is the main element providing value to the insurance company if harvested and analyzed in an adequate
manner. In product development there should be a data collection & analysis approach embedded in the business
model itself, otherwise the strategy will lack in bringing the desired added value. Having a “data mindset” in all the
stages of the business will ensure that the implemented model will have the capacity to gather and analyze the high
quantity of data provided by the interconnected devices and environments.
As Matteo Carbone who is an expert in the field says in his article, ultimately telematics is the integrated use of
informatics and telecommunications; it is about registering, storing and analyzing data via telecommunication
devices.
“Telematics could be one of the most relevant digital innovations in the insurance industry directly impacting the
technical results. Due to the pervasive diffusion of the Internet of Everything, this approach could be extended from
motor insurance to other insurance businesses.”

2. Carbone thinks that the next step in the insurance industry is the integration of such information gathered from
sensors, into the insurance value proposition; the sensors would be designed to register “behaviors, status and
context influencing the risk covered by the insurance policy.”
International best practices demonstrate that in order to reap actual benefits it is necessary to focus on
innovation. Insurance companies’ approach towards the health insurance policy has now the opportunity to
evolve and tackle rising health and wellness costs thanks to the widespread availability of advanced technological
means.
More importantly , the health insurance sector is getting a considerable amount of attention all around the world
and in particular in the developed countries. This is partly because of the ever growing costs related to certain health
issues like ageing and chronic disease and, on the other hand, due to the reshaping of Public Welfare. The common
factor at an international level is that the Insurers are trying to move from a simple Payer role to become a reference
point for all the health-related needs of their customers.
In light of the above, Health telematics (from wearables to m-heath) presents great potential for the insurer. Such
potential should be harnessed in a profitable way by targeting less risky clients and presenting them with an
improved, better-priced value proposition. For this to happen, the Insurance Company will have to seek partners
from both the technological innovation sphere and medical providers, keeping in mind that its role in the health
system is changing from “payer” to “pivot”. The trend is now clear as Companies are becoming more of a 360° health
“counselor” that assists the insured in taking the best decisions based on digital solutions. This helps in
differentiating their offer and also allows to manage the profitability levels.
The use of mHealth devices and gadgets certainly has its advantages as seen within the insurance value chain and by
making a parallel with the successful implementation of telematics on motor insurance business. In his article
Matteo Carbone goes on explaining which are those five main value creation levers for the health insurance
business:
1. Risk selection, enhancing the underwriting phase with a temporary monitoring based on dedicated devices;
2. Loyalty and behaviors modification programs, leading the client toward riskless behaviors;
3. Value added services, developing client tailored ancillary services that allow the Insurer to play as an omni-
channel medical concierge;
4. Loss control, developing a broad approach to mitigate claims:
a. developing "early warnings" system capable of anticipating more expensive claims,
b. adopting e-health and m-health approach that are able to reduce health-care costs,
c. improving reimbursement valuation;
5. Risk based pricing, developing insurance policies with pricing linked to client behaviors.
Risk selection may refer to one of the following:
 the capacity of self selection and deterrence of risky behaviors;
 the integration of data (gathered within a certain amount of time by means of “telematics”) with static
variables which are normally used for pricing - they have the sole purpose of being used as support for the
underwriting phase.
Whereas the average health insurance client will tend to be older in age and with a higher probability of having at
least some health-related issues, the younger customers are, generally speaking, healthier and more prone to using
wearables. This is key to Insurance Companies which can use it to their advantage by creating a gamification
experience that will attract the “younger” segment and will generate a self selection effect as well.
Behavior guidance – using a loyalty-based system which rewards non risky behavior - has proven to be effective on
several levels i.e. commercial appeal, the capacity of attracting less risky clients and also has the ability of reducing
the individual risk profile of each client.

3. Value added services is the second area of value generation and refers to the improvement of the customer
experience through the use of telematics data in order to construct new and improved health services: a classical
example would be the use of geolocation services related to medical structures and doctors (directly linked to the
medical reimbursement plan)
How can the Insurance Company maximize its efficiency when it comes to the process of guiding the client within
the preferred network? The answer is perceived value: a client that perceives the health-related service he receives
as having high value will lead to the creation of a mechanism which allows the Company to control the loss ratio of a
medical reimbursement product.
Telemedicine will certainly bring important economical benefits within the health industry, mostly involving the
optimization of spending related to medical reimbursements or to monitoring the client’s actual medical
prescriptions. The scope is to gather behavioral and environment-related data to prevent fraud and to maximize
early intervention and prevention.
In order to enable pricing definition based on individual risk there has to be a constant monitoring of the amount
of exposure to risk. This can be achieved by looking at the customer’s health state, habits and lifestyle through the
use of wearables and other devices.
Insurance Companies have to step up the game and provide what the clients need in terms of health-related
services. Here are some examples of such services: full medical coverage, other complementary services to those
provided publicly, long-term care and additional services like telemedicine or second medical opinion.
Some successful international examples
There are several best practices which have already started to integrate radically innovative elements into their
customer experience. We will present some concrete examples which have brought significant gains in terms of both
revenues and profitability.
The Vitality programme has been created by the South-African Holding Discovery and is one of the best examples of
how an Insurance Company can build a highly competitive business model by focusing on the selection of those
younger categories of clients which exhibit a better state of health. This, combined with a very effective reward
system, can help steer customer behavior. The immediate consequence is an increase in client retention for the
Company, which is almost always combined with a significant reduction in spending. Vitality is a great example of
how an insurance company can become a point of reference for its customers when it comes to health related
issues. Let’s take a look at how their incentive system works: the starting point is to evaluate the customer’s state of
health by using both traditional methods and wearables that allow to create a personal improvement plan; in order
to motivate the insured to follow through with her individual plan, the Company offers discounts for a wide range of
“health partners” including gyms, healthy food providers, sellers of wearables and other devices; moreover, when
customers adopt “healthy” behaviors recommended by the Insurer and achieve certain pre-established targets, they
can be rewarded with points . Last but not least is the payback of 20% of the annual premium (this is reserved to the
clients that have reached a certain number of membership years). The model performed so well that Discovery
rolled it out for other lines of business such as personal protection and motor insurance.
The approach of Discovery Holding described above has proven to be successful at an International level in the last
couple of years. This allowed the acknowledgement of the fact that there can be tangible and concrete benefits as
resulting from a mechanism which makes the health policy interesting for healthy individuals.
A traditional health insurance policy is of interest and brings value only to someone who has a health problem and
thus medical costs that need to be reimbursed. In these last years, the health Insurance companies have started to
develop a growing interest for wellness related topics. Talking a look at the actions of the players on this sector:

4. 1. They are clearly marketing-oriented and in some cases they also focus on how to monetize the services,
hoping that they would also manage to modify behaviors in the same way as Discovery manages to do. This
approach often remains at the idea level being difficult to implement because the insurance business case is
relatively risky.
2. Some see the wellness module as a “gift” for the client in order to convince him to share his personal data.
Other Insurance Groups use a different approach on health business innovation based on medical services.
An interesting example is Mediabank, a leading Australian health insurance company which was privatized
in 2014., , Medibank has a great incentive scheme and leverages technology to become the pivotal
element between clients and medical providers. In order to create its reward plan, Mediabank has
partnered up with Flybuys to allow its customers to accumulate Flybuy points while accomplishing
different objectives: a proven healthy diet triples points for healthy food shopping at Coles; every 3$ spent
on insurance premium translates into 1 Flybuy point; 10 Flybuy points if a daily goal of 10.000 steps is
reached (using a wearable device). The Company chose an internalization of medical preferences approach
making available a 24/7 virtual nursing service via phone meant to offer remote health assistance and
information. Another benefit is the online health portal which provides medical-related information, tips
and coaching to customers. To complete the picture, Medibank has also created their own virtual clinic
called “Anywhere healthcare” for those insured that seek a direct confrontation with a specialist via video.
The preferred user interfaces are by far digital ones as Mediabank provides apps for almost any type of
service. For example they have apps for making a claim, locating medical structures, checking symptoms,
receiving physical exercise & diet tips and for discounts and other privileges etc
Another interesting and ambitious initiative concerning the health marketplace field – launched in the last months
by CXA, a broker who is active in the Employee Benefit sector – shows another way of how to make a profit from
selling add-on services to the insurance policy associated with the customer experience.
A third area concerning medical services are remote health advice tools. During the last 6 months, many companies
have associated a health policy to a remote health advice service via app (Aviva with Babylon in UK, FAB with
Consiglio dal Medico in Italia, Blue Cross with American Well in USA, Aviva with Chunyu Online Doctor in China).
There are US cases that have started to approach these topics focusing more on innovating the key profitability
levers: Oscar (app-based health plan, which has a guidance process made possible by a complex tool that allows to
compare medical structures and receive remote health-advices, not to mention engagement elements, wellness
rewards,… ) and Beem (this basically is a Bluetooth-connected toothbrush that communicates with an app, a dental
insurance policy and a network of dentist).
Oscar is an American-based start-up that has excelled in using technology in order to maximize its profit pool within
the health insurance area of business and in order to differentiate itself from the competitors. To begin with, Oscar
came up from the start with a simplified underwriting process (compared to traditional players) and modeled its user
experience with the help of intuitive mobile applications thus creating more ease on the customer’s side. Taking a
look at the more technological aspects of its business model Oscar focuses, like Discovery, on attracting younger
client segments by offering an attractive reward system and wellness apps/activity tracking apps. They also manage
to help clients save money or simply identify their best options: the possibility to confront prices of different
medical providers or medical doctors (based on geolocation criteria) means added value from the insured’s point of
view; this approach is replicated when it comes to comparing prices of medical treatments by looking at different
pharmaceutical products. In order to limit spending related to first time medical visits they have adopted a free call-
back and messaging system via mobile applications (remote health advice) which provides a partial filter meant to
reduce the number of unnecessary consultations. The model put in place by Oscar succeeds in offering value added
services from the customer’s point of view while securing business profitability due the effectiveness of the process
to influence the client choice.

5. The winning insurance value proposition will be the one which is able to propose to its customers both
insurance components together with modular services made available in a single, easy to use and
complete UX accessible via a mobile app: wellness, medical network access and medical services.
Such smartphone app should be able to give access to all the modules and services provided by the Insurance
Company through a user-friendly experience . As data gathering is another essential part of the process, the app
would have to communicate and collect data from all the other relevant apps on the market and also from the
wearables that the insured uses. The user should have one unique tool (the app) for accessing all the information
related to her health insurance policy. Gamification, as we have seen in the examples described earlier in this article,
is key to attracting and retaining those “healthier” segments of patients. To do so, the system has to be flexible and
must be able to communicate with third party service providers (.g. Health TPA, telemedicine player, medical
concierge, etc.) as well as with the Company legacy system. Last but not least there is the commercial strategy which
should incorporate both digital and traditional infrastructure in order to ensure a complete omnichannel approach.
An approach built upon the five value creation areas – the same already exploited by Insurers in motor
business - which I’ve described earlier in the article, has the capacity to bring concrete and relevant
benefits to the Insurer’s P&L. In order to do a quick recap of these concepts I will illustrate what type of
benefit results from each value creation area and what the enabler is in the single cases.
Value creation from an insurance point of view is based on five elements which are closely interconnected with the
insurance coverage:
1. Risk selection: attracting healthy individuals; here the wellness module is the ideal lever;
2. Loyalty and behavior guidance: getting healthy individuals to become loyal clients and incentivizing them
towards an even healthier lifestyle; in this case the wellness module is the perfect lever;
3. Services: Here there are three key elements, the wellness module being one of them. But the fundamental
aspect is that part of the user experience related to the access to the preferred network: this is the case of
Oscar which has the instruments of interaction within the network of health clinics and medical doctors, as
well as a mechanism to confront structures/doctors and to book appointments. The third element is
represented by mobile health services: for example adhering to certain treatment “pathways”; or services
for chronic patients or elderly people – in this case the company does not insure the risk but they are part of
the family-network of the person who bought the insurance policy.
4. Loss control: reduction of the payment made by the Insurance Company

6. a. A very immediate benefit is the possibility of using mobile health services (mentioned above) in
order to reduce the cost of a great number of services which are currently being paid by the
Company; in this case the main lever is the mobile health services
b. access to the preferred network becomes an important element in guiding the behavior (by this it is
intended “where to go in order to receive treatment”) of the insured and it is the key to a health
insurance company’s profitability. This is the concrete way for the insurer to make its role from
“payer” to “health pivot”, this benefit instead requires progressive work in order to exploit its
potential.
c. Medium/long-term benefit – still in need of research and a more mature technology – which uses
the wellness module and the mobile health services with a preventive approach in order to be able
to act before the patient develops a health-related problem
5. Pricing risk based: here I foresee a long way ahead which requires the construction of an integrated
database made out of the 3 modules, putting together technical data (paid claims) and CRM data provided
by the Insurance Company, in order to progressively build ever more efficient risk models that can allow, in
the mid-term, to define important rewards and at the end a risk-based pricing.
The way to quickly turn this ideas into reality and disrupt health insurance market is a smartphone app – design to
deliver the value proposition described above with an integrated customer experience - and a “state of the art”
platform able to gather, store and manage all the data. The best source of knowledge and inspiration in creating the
process and the platform itself is the telematics motor insurance. Motor insurance is some years ahead of the health
insurance business and can provide some great examples of how to structure a successful process and how to exploit
the value of data gathered along the insurance value chain.
Andrea Silvello is Founder and Managing Director of Business Support Spa, a Strategy Consulting &
Financial Advisory "boutique" which focuses on SME's in Italy.