Rapidly evolving landscape of health insurance

JESSICA PLEWES: Thanks for having me.

SINA THIEME: Hi, James, thank you.

JAMES HAYBYRNE: Hey, Sina, thanks for having us.

SINA THIEME: Jess and James are directors in our Insurance, Consulting, and Technology practice in London. And you guys have a particular focus on health insurance. So you both worked at Bupa prior to joining WTW. Jess, you were a senior growth, or the senior growth lead, at Bupa Australia and also worked quite a lot with health insurers as a consultant. James, you were the head of pricing transformation at Bupa UK.

So we'll be talking about health insurance more generally today, and what's changed, and what health insurers can do to react or even lead the pack. And particularly, since COVID, we've seen quite a lot of activity in this space. Whether that's around affordability, plan design, cost trends, or cost shifting, digitization, AI.

But before we get into that, I've got this habit of finding out a little bit more about our guests before diving into the topic. So if you've listened to this podcast before, you know that I start by looking at Google results when searching for your names. So there is a James Haybyrne who is the CEO of Strategic Thinking Group, and he wrote a book on how to run a business. The book is called Dream. Think. Become. So, James, are you living a double life?

JAMES HAYBYRNE: Yeah, I've always wondered this. I've spotted him myself before. He's like, seems to be based in Hong Kong. So I've always wanted to reach out to him and see where his name came from and how we know each other. But, yeah, different James unfortunately. But, yeah, I need to reach out to him at some point.

SINA THIEME: And Jess when searching for your name online, a lot of WTW results come up. But there's also a German, Jessica Plewes who runs a karate school in Germany, and also Jessica Plewes who's a university professor for anatomy. So these are the sort of results you wish one would find?

JESSICA PLEWES: Yeah, I mean, the karate one is quite interesting. Why not?

SINA THIEME: Cool, a second career choice. But I guess, before we move on to karate, let's discuss health insurance, right? So I said in the beginning, providing consulting and technology solutions to health insurers is actually quite an exciting area for us. James, what would you say are the most significant global trends in health insurance for 2025?

JAMES HAYBYRNE: Probably one of the key ones is around general medical inflation rates and the long-term affordability of health care. And so we see-- I mean, inflation is always a hot topic in insurance. But I think you see in medical inflation, it tends to have quite high rates relative to general inflation. And so you always see that health care costs are rising more than standard other costs. And so, as we go over time, it's essentially becoming more and more unaffordable.

And there's a few different drivers of that. So there's always the costs of things, like new drugs and medicines that are coming out that drive the increase of the average costs of treatments. But it's really interesting since COVID, I think we've also seen quite a shift in behavior for how people are actually claiming what they're claiming for and how they're using their policies.

I think since COVID, people have felt that they're going to make more use of their health policies, and so they're going out there-- and we're seeing more claims than we've seen before. And that's driven not just therefore a cost increase in inflation, but also a frequency change in inflation.

And it's quite common across the world as we look at it. And so, if those trends continue and you see health going up, it creates big long-term problems for the industry. And so I think that's one of the big key trends that we're seeing.

SINA THIEME: Jess anything to add to that?

JESSICA PLEWES: Yeah. So I guess on the back of that and given what James was just saying, I think what we have seen, like we have seen insurers reacting to this. We do know that medical costs are going up. So it's been a real shift and a real focus. And especially, since COVID, where people have been more engaged in their health, insurers are looking to change away from being a health insurer to a health care partner. They're really focusing more around not being reactive, not being known to be just to pay claims, but actually thinking more about proactive health care models.

And because, as James said, it's not sustainable. The way we're going at the moment, it's not a sustainable aging population, incidence of chronic diseases are going up. So I think insurers are really shifting the focus and really thinking about preventative initiatives and really focusing on how can they lower their costs. Well, one thing in particular they can do is try and improve the health outcomes and by improving the underlying health of the individual.

So, yeah, we've seen a real focus on this proactive health. And I think that what has been quite interesting in this and what's made the health space even more exciting, is it's changed the dynamics of the industry in terms of the competitive landscape. Because, yes, they're known as health insurers, but how can they get into this preventative space. We've been seeing a lot more, some more strategic partnerships to try and expand their ecosystem, I guess, and create this health ecosystem. And we're seeing other players enter the market in terms of looking to particularly focus on certain areas of their health value chain.

SINA THIEME: That's useful background. And you already touched on the innovation that's happening in the health insurance product space. What do you think are the biggest changes generally that you're seeing and what impact have they made on insurers, Jess?

JESSICA PLEWES: Yeah, I mean, I think-- look, I mean, as I was saying, preventative is key. So I think, everyone's buzzwords, but definitely the wellness programs. I think people are really getting into those, really focusing on wellness. And we've seen the vitality model that-- and it's all about how can we stay well. And I think that insurers are really leveraging those well-being propositions to keep people well, prove outcomes, but also engagement.

Like there's been a focus since COVID people are naturally a bit more engaged. So it's how can we gamify this, and how can we try and keep people engaged to improve their health? And that's on the spectrum of proactive care. But then I think in terms of the products and the innovation, I think they're really leveraging data and analytics to be a bit more focused in terms of chronic disease programs. How can we leverage those to support customers or mental health packages? How can we focus on some more specific products around that? There's quite a lot being done at the moment. We see around trying to connect care a bit more.

So in terms of, when I said about the ecosystem, how can customers connect the care from that first initial GP visit all the way through to potentially a hospital stay? So key product changes.

JAMES HAYBYRNE: So, yeah, I'd probably say there's a couple of other extra areas as well that I'd call out. So one is probably around digital health. So I think in the last couple of years, we've seen a lot of new virtual products coming out. So one of the most standard ones is things, like virtual GP. So now you can contact your GP via an app on the phone. And so when people might struggle to get to GPs via the traditional methods, you can use this instead. And you can easily get to them on your phone.

So I think that's a really interesting development, and there's loads of new digital versions coming out that can support health insurers with their products. So I saw one recently where you send a photo of your mole off onto an app, and then it would use AI to scan it, and have a look and see if they thought it was likely to be cancerous or not, and flag up a risk and refer you to a doctor, if they thought that it looked like it was going to have a problem.

And obviously, there's loads of information as well around your heart rate and things like this. And we're starting to see some people trying to track all of your Apple Health data and try and see when your heart starts acting unusual. They might flag up something, a notification to you and say, hey, there's something funny going on. You might want to go see a doctor right now. So I'm loving all of these changes that they're making to these products and making it really exciting and having lots of new innovations.

I think one of the bigger problems I've got with it is just figuring out which of these is actually helpful for customers, which ones add value to you as a business, and which are actually just creating more claims that don't actually help the customer in the long run. It's something that I think insurers have to figure out.

And I think another area is probably around how people are changing the product to attract younger customers. So I think the traditional method of insurance was you buy a policy, you pay a couple of thousand pounds maybe a year, and you hope never to use it because you don't want to, I think, you don't want to get ill, really. So if you don't have to use a policy that's great.

But I think what we're seeing from younger people is they want to get more value out of their policy. So it's not that good for younger people just having a policy that they never really get any value of. So they want to see some benefit to themselves. And so insurers are having to think a little bit differently about how you structure your product. How can I show the value of it right now, rather than waiting to someone to make a claim until they see any value?

And it was also ways you market these things as well. So, you know, calling it a health care subscription rather than a health insurance policy changes the way people think about it. And I'm like, Oh, OK. If it's like a subscription, and you can bundle it in with your Spotify package or something like that, that's a different way of approaching insurance. And it makes younger people think about it differently. So, yeah, I mean, I think the products part is really exciting. Lots of changes going on, and I'm excited to see how the products continue to develop going forward.

JESSICA PLEWES: Yeah, I think digital health is definitely an interesting topic. I think also just to touch on that. I think that given the rising costs, we're actually seeing insurers as well, looking at alternative care offerings, for example, like cancer in the home settings or how can we get people out of hospital even earlier and transitioning to the home to look to lower those costs? And we are seeing that patients do like being at home to receive treatment. And also, I guess, it's value for the customer and also value for the insurer in terms of it's a lower cost setting.

And I think what's important for the insurers is to think about how can they shift some of those costs out of the hospital setting, but then also, how can they adjust their experience and think about it when they're projecting out and how their members behaviors are changing.

SINA THIEME: And so it becomes pretty obvious that there's just a wealth of data that health insurers are sitting on, right? Or can be sitting on. So how are or how should insurers use AI and advanced analytical capabilities to actually improve their offerings? James, do you want to go first?

JAMES HAYBYRNE: Sure, yeah. So I mean, this is-- I mean, this is a really key area, as you say. The more and more data you get, the more interesting insights that you can pull out of it. And so using advanced analytics to get those insights is increasingly important. And so we're seeing a lot of investment in there. So whether it's the technology that you use to be able to pull this out, but then also how you use it, and what you're using your analytics to call out.

So within health insurance, one of the big things is around claims. So when I'm selling a policy, I have no idea what the claims cost is going to be for somebody that I'm selling to. But with all the data that we've got now, you can start to use that analytics to say, OK, I can get a really good picture of what's the cancer risk for this individual, or what's the risk of them having some musculoskeletal problem.

And you can start to use that to get really granular in terms of understanding the claims risk that a customer presents to you. And there's lots of new techniques that can extract more and more value out from that. So we see traditional statistical techniques being supplemented now with machine learning and additional AI techniques to understand that customer better. Because if you understand the customer better, you can sell policies to the right risks. And you can stay away from some of the bad risks that seem like they're underpriced.

And we're seeing that as well in terms of customer behavior as well. So I can understand whether a customer is going to lapse or whether they're going to buy my policy or not, or whether this claim is going to turn bad. And it's like claim for that-- I therefore need to track more closely. So we're seeing some really interesting use cases for analytics.

And it's also quite useful-- because when you understand the customers as well, as well as getting a really more accurate price that you can use for them, for instance, we're also seeing people then use that information to target new products. So if I know that a certain customer has a much higher cancer risk, or they have a much higher risk of getting back problems, I might have a product that deals with that feature that they're likely to come up against, and you can market and tailor your products towards different individuals. And so, yeah, with all this data, there's so much insight you can pull out and tailor your proposition and your pricing much more closely to individuals.

JESSICA PLEWES: Great. And I think that I wanted to touch on AI a little bit, but just something to add in terms of the data. I think and I spoke to about the wellness programs and all these programs around chronic disease management and mental health. I think one of the key things, and this is where I do think that insurers are looking to do, is how can we actually build up the business case in terms of these initiatives?

Because, as you can imagine, sometimes it's more of that upfront costs initially, and you won't actually see the benefit of these programs and these changes until that later stage. So I think that they're like, how can we leverage data? And like James said, in some of these advanced analytic techniques to actually help support the business case around some of these initiatives that are being introduced into the market.

And going on to that, I just wanted to touch on AI, and some of that is we have seen in the market, there has been some nervousness around this. And it's potentially been mainly used more on the admin side. But as James said, in terms of certain creating products that are quite focused on the youth or certain chronic conditions, for example, we are seeing that AI is potentially being used to help support insurers in terms of the communication to customers.

I think health is complex. There's a lot of complexity about where I go, where I get started? You go on to the insurer's website. It's like, OK, how can you help me? How can you help coordinate me? How can you tell me which is the best provider for me? And how-- where do I start? Where do I go? So I think that we are seeing them leverage AI in that communication space and that education.

And in particular, in the youth market and the way that things have been progressed in this space, I think that they're really leveraging that for everything they do now. So I think it's how can insurers leverage that capability to improve that communication to customers?

SINA THIEME: And so, Jess, what sort of disruptions are you seeing on the horizon?

JESSICA PLEWES: Yeah, that's an interesting one. And I think everything that James and I have spoken today around in terms of thinking about these global trends, so not just insurer global trends in terms of rising medical costs, aging population, and higher incidence of chronic disease, It's a health system issue. So I think that at the end of the day, I think the biggest thing that will be interesting to see going forward is the public-private play. It's an issue for both public and private.

And looking at the moment that we're sat in the UK, and if we think about everything that's happening with the NHS, in some ways, the insurers are riding the high on that a little bit in terms of that, we're actually seeing more and more people take out health insurance due to the long waiting lists in the public space.

And I think that at the moment, yeah, insurers are getting more people on. But are they coming and joining and leaving or are you going to be able to create that value, like James said, and be able to of keep them long term? And what happens if the public system-- if things do improve in the public system, what does that mean for the private health insurers in terms of their proposition? Is their proposition still valuable enough for someone to put in money given that cost of living pressures? So I think that some of the disruption that I see is the interplay between public and private.

And I think that's going one step further from the UK that there are different ways in terms of the structures of the public and private system. It's very different over in Australia, for example, where 50% actually have private health insurance and the public-private is definitely more of a hybrid. So, yeah, I do see that.

And whether-- the other big thing I just wanted to add on the public-private split, and it is a health care system issue, some of these trends is that what might happen in terms of reforms? I think that's something for insurers to think about in terms of what changes might come out in the future.

I think the other thing in terms of what we're seeing in disruption, what could it be interesting in the future is how we change our funding model. So at the moment, we're looking at a fee for service. And we do know that that potentially there's been some incidents of overservicing. And there's potential talk around can we move to an alternative funding model in terms of outcome-based funding, which I think is a really interesting topic, and how do we move to maybe more of a hybrid setting in terms of certain procedures might be more of a fee for service, but then there might be some outcome-based funding for certain conditions.

I think the one to think about there is how does it impact the patient, but also the provider. And does that impact the way in which specialists think about which cases they take on, if they think about their funding being delivered based on the outcomes, and will they be less likely to take on those riskier cases.

JAMES HAYBYRNE: A couple of extra things I would add as well. So one, disruptions is always around things, like new drugs that come out and the impact that they might have on society and treatments. So one of the new ones that's quite interesting is the impact of some of the new weight-loss drugs, like Ozempic. We've seen that health care costs in Western societies have been paying out a lot more for things, like diabetes, with our weights, on average, have gone up as societies.

And so when you've got these new, quite expensive drugs coming out, there's big questions around, OK, what impact is that going to have on my claims that I've seen in the past? Is that going to reduce a lot of these chronic diabetes claims that I see, and is it therefore worth funding it and offsetting against the high costs, or is it not going to have very much at all? And I might end up just funding a new drug, which actually doesn't have too much impact in the long run.

And there's always new drugs and things like this coming out. So lots of these disruptions from there and how that's going to impact us in the long run. And I also see an interesting, in terms of personalization of insurance and also medicine. And so, we've seen some insurers, for instance, have started doing things, like genome sequencing, where they will sequence the genome, see if you're at risk of certain conditions, and then offer you a tailored preventative plan to stop you from-- to try and help you from developing certain conditions that your genome will suggest you're more at risk of.

And there's a question around how customers perceive something like that. So I mean, that really great. You're going to give me something that's going to go-- but you're using very personal data there. Where is that data going? How is it being used? And at the moment, they're offering to tailor you a preventative plan. But at what point do insurers start pushing more and more for saying, well, if I've got all this really personalized information about yourself, can I use that to set you a more personal price? Because I understand your risk a lot better.

And at the moment, ethically, that's not OK. There's restrictions on that. But I wonder, as we get more techniques that are able to get more and more value out of your own personal genetic and biological data, will there be a push to use that in the insurance space a lot more freely? And should we? What's the ethical consequences of that? What do we think about all of that and how will societies react? So I think that's a good long-term issue on the horizon to think about.

SINA THIEME: Yeah, it sounds there is actually a lot going on here. So based on your prior roles in the industry, based on the projects you're working on with health insurers, and I guess the sort of perspectives you've given in the last 20 minutes, what are the key takeaways for you from this session?

JAMES HAYBYRNE: I mean, I guess, I think my three key things that I would say is one, all of this stuff always comes down to data. So to understand the impact of new product features or to do my better analytics, I always need data that's capturing all of this information, and it needs to be good quality data. So I would always say to insurers, be thinking about your data all the time. How is your data requirements going to change in the future? What data should you be collecting to enable you to stay on top of all of these developments, and how you structuring that and making that accessible to your business?

My second would be around then the analytics you do on top of that data. So what technology you're using to be able to pull out the key insights from your data? And then how are you thinking about what analytics to carry out? What should you be looking at? What are the things that are going to add value to you as a business that's going to make you stand out from other insurers? How are you going to understand customers better and get a better grip? And that's the whole point of using analytics, is to enable you to get a much better grip of what's going on and understanding what's happening.

And then the third one is probably around with all the new product developments going on, how do you assess the effectiveness and value for money that these are adding and customer behavior that's going to have? How are you assessing all of that? And I would be thinking about having a framework that enables you to assess different options as they become available, so that you can make the decisions to partner with the right people in order to make your product stand out, whilst also adding value for money.

JESSICA PLEWES: Great. Yeah, thanks, James. Yeah, I totally agree with all of those points. I think the final thing to raise, I think, will be-- is the point around building those business cases for those initiatives, and to James's point, is how we can leverage data and analytics to do that. Because I think that's going to be key, because I think we can think about the long-term value rather than strategically thinking more short term with all of this prevention and earlier intervention.

SINA THIEME: Great. Thank you so much, James. Jess, thank you for joining me. That was very insightful. Thank you. And thank you to our listeners for joining this episode. If you found this interesting, then please join us on other episodes of (Re)thinking Insurance.

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