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The Actuary Magazine

The first life insurance policy is said to have been written in England in 1583.1 Originally, life insurance was meant to serve a simple purpose—to provide financial protection for the death of a key business partner or loved one. As with any market, life insurance products have evolved to offer more than just death benefit protection. Products began to include cash value accumulation features at fixed rates and then tied to specific indices. The life insurance trends that followed included products that allowed for more flexible premium structures through a universal life chassis. The evolution in life insurance trends continues today as we see a variety of pure protection and cash value accumulation product combinations, and even products that allow for asset decumulation.

With this evolution, it begs the question of how life insurance will continue to change over the next several decades to meet the needs of customers—aside from providing financial security. A common perspective in the market is that life insurance products will continue their progression by transitioning to not only providing death benefits but also helping insureds live longer and healthier lives. After all, life insurers and insureds have closely aligned interests. If policyholders maintain healthier lifestyles, they may live longer and enjoy more meaningful lives with loved ones while increasing the profit margins of life insurance policies—it’s a win-win situation.

Early Partnerships With Health and Wellness Platforms

While still at an early stage, we see today that carriers have started to partner with wellness platforms to incorporate health and wellness riders into their life insurance products, offering a new era of insurance benefits. These benefits meet a true customer need in that they can provide specific insights to improve health and customer engagement and offer more value to the customer than the typical life insurance product. However, it appears to us that there is still uncertainty as to whether these programs provide an economic benefit to life insurance companies.

Health and wellness riders and benefits have been around for several years. Through these programs, carriers have partnered with wellness platforms to incentivize policyholders to live their healthiest lives. These programs can have different characteristics, but generally, they reward policyholders for engaging in healthy behavior and lower the cost of insurance if certain health milestones are met. This has a secondary impact of attracting healthier applicants.

Distribution organizations focused on health-conscious individuals, such as Health IQ,2 also entered the market, offering lower-priced life insurance for healthier applicants. The goals were to create positive selection in individuals purchasing life insurance, increase engagement with customers who can lead to better persistency and incentivize policyholders to make healthier life choices that would potentially improve individual mortality outcomes.

During the COVID-19 pandemic, the launch of health and wellness programs stalled. However, since then, there has been a renewed interest by carriers to differentiate their products and provide consumer-centric benefits. In addition to wellness programs, a new life insurance trend is piloting insurance products that incorporate diagnostic tools to check for serious diseases and health conditions.

One example is GRAIL’s Galleri cancer screening test,3 which helps policyholders identify early stages of potentially deadly forms of cancer so treatment can begin sooner, improving their odds of survival. Other companies, such as Genomics PLC,4 offer services that test for genetic predisposition to conditions such as diabetes, heart disease and cancer. Additional carriers offer other benefits ranging from fitness tracking platforms, wellness and nutrition resources, mental health services, health advice and discounts for going to the doctor for annual checkups. However, as carriers look to launch these kinds of health and wellness benefits, we believe it’s important to consider not only which benefits and features customers value but also the financial impact that incorporating these benefits can have on product pricing.

Considerations When Entering the Health and Wellness Benefits Space

As insurance carriers look to enter the health and wellness space, a common consideration is which types of benefits will appeal to customers. What aspects of health and wellness products are customers interested in? Do they care about incentive-based rewards, diagnostic testing or bespoke health guidance? After all, some customers may see value in these benefits while others may see them as complex or unnecessary when purchasing life insurance. How will this affect future life insurance trends?

Ernst & Young LLP (EY US) consumer research, including a survey of 506 people on interest in health or wellness features in life insurance products, found the following:

  • Twenty-two percent of respondents fell into the wellness cohort and said they were “a lot” more likely to purchase a life insurance product with a health management feature. These individuals tended to be wealthier, younger (84% being younger than 45 vs. 62% of those surveyed) and likely to view financial wellness as related to health and wellness.
  • Those interested in health management features were most interested in making better health care decisions personalized to them (68% of the wellness cohort). Incentives and bonuses also motivated 61% of the wellness cohort.
  • Of the wellness cohort, more than 90% were either generally comfortable or very comfortable sharing their data. They trusted life insurance companies with their health information to support them living longer.
  • The wellness cohort was willing to pay more for health management features from insurance companies, with 58% willing to pay $40 to $100 for a single at-home test (vs. 32% of the total population surveyed).

Based on this, it’s clear to us that wellness benefits aren’t for everyone, and it’s important for carriers developing these benefits to properly market them to those customers who find value in these services. In addition, premium discounts for healthy behavior don’t appeal to everyone, and depending on the structure, earning enough points to gain meaningful rewards in categories that are important to the customer can take time. Complicating matters even further, there are still questions about how rebating rules and other inducement regulations may affect these benefits.

As carriers continue to move forward with wellness programs, it appears to us that questions remain around the impact on the economics of their underlying life insurance policies. Will these programs be a net cost or a net benefit to life insurers’ bottom lines? In our experience, many programs are developed with expectations that they will lead to favorable mortality, improved persistency or positive selection, or future lower cost of the diagnostic tools. Improvements in these characteristics could provide additional margin or allow companies to cover the costs of these programs to incentivize more sales. While evidence from carriers indicates that some of this may be true, one of the big unanswered questions relates to mortality improvement—especially since there is still no tangible evidence that implementing wellness programs will lead to a change in behavior that drastically shifts the mortality curve for those previously unhealthy individuals. Given that these programs are early in their existence, it takes time for mortality experience to develop.

Simply put, findings seem to indicate that wellness programs are not effectively getting people off the couch, though a recent Society of Actuaries (SOA) Research Institute Report found that “the more targeted the intervention is, the more likely it is to impact behavior.”5 Our observations are that the programs marginally increase health, with the healthier insureds reaping more rewards. While it’s reasonable to expect that disease screeners can improve mortality for individuals who can identify and act on them, carriers still see challenges with certain tests costing more than $1,000, leading to questions on whether they are economically viable.

For More Information

Read the SOA’s “Effectiveness of Health and Wellness Programs” report.

Future Life Insurance Trends

The market for health and wellness products will continue to evolve as we are in the early stages of carrier and customer adoption. As wearable devices and precision medicine become more advanced, there is an opportunity to continue advancing wellness offerings to provide the customer with insights into their own health. As companies continue to develop these benefits, here are questions they could seek answers to that may affect life insurance trends:

  • Am I targeting the right audience for my health and wellness benefits?
  • How do I incorporate costs of benefits into product pricing, and will persistency or behavioral changes offset some or all of these costs? (Some products or segments may not have the margins to support wellness benefits unless more hard evidence can be found for improved mortality.)
  • How can tailored wellness support be provided to an individual?
  • What are operational and regulatory considerations when implementing health and wellness benefits?

Overall, business opportunities in health and wellness benefits are too large to ignore. As the market continues to innovate, we expect that consumers will demand more of their life insurance products. We have observed many carriers exploring the health and wellness space, which could lead to a diversification of health and wellness benefits and product offerings that benefit customers in the long run. We believe it’s a great opportunity for carriers to align themselves with their customers to not only provide financial security but also provide health insights for the policyholders they serve.

Jason Zwanch, FSA, MAAA, is a managing director at Ernst & Young LLP. He is based in Miami, Florida. The views reflected in this article are the views of the authors and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.
Ammon Dixon is a managing director at Ernst & Young LLP. He is based in Charlotte, North Carolina. The views reflected in this article are the views of the authors and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.

Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries or the respective authors’ employers.

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