Bending the q(x)’s: Where Actuarial and Behavioral Bending the q(x)’s: Where Actuarial and Behavioral Bending the q(x)’s: Where Actuarial and Behavioral Bending the q(x)’s: Where Actuarial and Behavioral Sciences Sciences Sciences Sciences meetmeetmeetmeetMonty Hilkowitz FIA
2
Recent Forces which have Impacted Insurance
3
Mortality rates are improving over time, for all age groups
NOTE: US rates for 2001–2009 are revised using updated intercensal population estimates and may differ from rates previously published; see Technical Notes.SOURCE: CDC/NCHS, National Vital Statistics System, Mortality.
4
People are living longer
Source: World Bank Data; The Kings’ Fund
50
55
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85
1960
1961
1962
1963
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2008
2009
2010
2011
2012
1st world markets
Global Life expectancy, 1960 - 2012
2 decades5 years
Global
5
Increasing healthcare costs over time
US inflation 1978 = 100
Baumol cost disease: US Census Bureau data
Medical prices
6
Healthcare inflation is generally 1.2x to 1.8x general inflation
Consistent trend across markets
Ratio of medical to general inflation
1.58 1.62 1.65
1.21
1.82
1.40 1.39 1.50
1.30
Glo
bal
UK
Chin
a
India
Italy
Germ
any
Fra
nce
Russia
South
Afr
ica
General inflation threshold (General inflation threshold (General inflation threshold (General inflation threshold (1111))))
Source: Towers Watson 2014 Global Medical Trends
7
Commoditization ofLife Insurance
8
Impact of Behavior on Disease Burden and Mortality
9
From infectious diseases to non-communicable diseases
Close to 60% of premature deaths and 70% of the disease burden globally are from non-communicable diseases,
86% of deaths in Israel are from non-communicable diseases
WHO NCD publication 2015
10
From infectious diseases to non-communicable diseases
Oxford Health Alliance Model
55550000%%%%
4444
33333333 lifestyle lifestyle lifestyle lifestyle
behavioursbehavioursbehavioursbehaviours
4 4 4 4 chronic chronic chronic chronic conditionsconditionsconditionsconditions
55550000% of deaths % of deaths % of deaths % of deaths worldwideworldwideworldwideworldwide
Diabetes, heart & lung diseases, cancer
Physical inactivity, poor nutrition, smoking,
11
How it all began..............
12
Development of Vitality in 1997
Removing the upfront barriers to Removing the upfront barriers to Removing the upfront barriers to Removing the upfront barriers to getting active/healthygetting active/healthygetting active/healthygetting active/healthy
Attendance tracked by integration with Attendance tracked by integration with Attendance tracked by integration with Attendance tracked by integration with fitness club systemsfitness club systemsfitness club systemsfitness club systems
Free gym!
Discount maintained based on Discount maintained based on Discount maintained based on Discount maintained based on exercise engagementexercise engagementexercise engagementexercise engagement
Minimum number of gym visits in a year
to maintain discount
Marketing appeal and attracting healthier lives
Measure gym attendance on an individual Measure gym attendance on an individual Measure gym attendance on an individual Measure gym attendance on an individual basisbasisbasisbasis
Encourage people to get active and retain Encourage people to get active and retain Encourage people to get active and retain Encourage people to get active and retain healthy healthy healthy healthy behavioursbehavioursbehavioursbehaviours
13
Vitality Vitality Vitality Vitality systemsystemsystemsystem
Clinical measure of member engagementOne year cycleExercise Eating healthy foodsRegular Health assessment Clinical Impact of each activityPoints confer status
14
Today, it has evolved into the most sophisticated wellness program globally
1. Online assessments
2000 points
Vitality Age
2500 points
Mental Wellbeing
Assessment
1000 points
Online Fitness
Assessment
Complete
online health
assessments on
discovery.co.za
2500 points (set up)
500 points (set up)
Family History Tool
15
Today, it has evolved into the most sophisticated wellness program globally
2. Vitality Health Check
Do a Vitality
Health CheckWeight assessment
Boosted to 3000
points
Blood glucose
Boosted to 3000
points
Blood pressure
Boosted to 3000
points
Cholesterol
Boosted to 3000
points
16
Today, it has evolved into the most sophisticated wellness program globally
3. Other health checks
Pap smear
2500 points
Mammogram
2500 points
Colonoscopy
2500 points
Glaucoma screening
2500 points
HIV
test
5000 pointsDo further
health checks
17
Today, it has evolved into the most sophisticated wellness program globally
2. Nutrition
Nutrition: 20 points per healthy item
3. Physical activity
Exercise: 100 points (Gym visit) to 3000 points (Race)
18
Success led to the development of the Vitality Status
PROGRAMME STRUCTURE POINTS STRUCTURE
Note: For each additional member aged 18 years and older, add: 10 000 (Bronze), 20 000 (Silver),
30 000 (Gold).
19
Success led to the development of the Vitality Status
Receive points for doing healthy activities
Going for a health screening
Going to gym
Not smoking
Get a Vitality Status Unlocks discounts based on your status
Example: Flights
20
Vitality member journey today
1. Know your health 2. Improve your health 3. Get rewarded
43Chronological
age 40
A meta-analysis of over 5000 published studies (75m life years of data from recognized developed-world studies)
Vitality Age Begin your wellness pathway
Disease management
Smoking cessation
Mental health
Nutrition
Preventive care
Physical activity
1.5
1
0.5
Difference
Vitality Status Rewards
Example: Flight discountsExample: Flight discountsExample: Flight discountsExample: Flight discounts
21
2001 2015
Success in driving engagement: Exercise
Gym visits
70707070,,,,000000000000>25m visits a year
gym workouts every day
22
22 Boeing 737
planes full of Vitality members enjoying discounted flights every day
23
HealthyFood: Making healthier alternatives easier
1. Clients activate the benefit online
10%
Get
cash back
Complete a
Vitality Health Check
25%
Get
cash back
24
HealthyFood: Making healthier alternatives easier
2. Select from a wide range of healthy foods
25
Success in driving engagement: healthy nutrition
HealthyFood spend
Healthy Food Other food
2009 2015
32323232,,,,000000000000 HealthyFood baskets purchased every day
26
Example of behavior change: HealthyFood
Increase in HealthyFoodshare of total food basket
Those with 10% cash back
Those with 25% cash back
Month before activation/months after activationMonth before activation/months after activationMonth before activation/months after activationMonth before activation/months after activation
27
30,000,000life years of health and mortality data collected
28
Codifying morbidity curves
Healthcare costs: Total
30 40 50 60 70
Rela
tive c
laim
s e
xp
eri
en
ce
Age
Blue Bronze Silver and Gold
1/3 lower
29
Codifying curves for specific chronic conditions
15 25 35 35 55 65 75 85
Rela
tive c
laim
s e
xp
eri
en
ce
Age Band
Blue Bronze and Silver Gold
Healthcare costs: Cancer
20% lower
30
31
Validation of impact on clients
Study Study Study Study 1111: Non: Non: Non: Non----chronic conditionschronic conditionschronic conditionschronic conditionsHospital costs Hospital costs Hospital costs Hospital costs for engaged Vitality members are for engaged Vitality members are for engaged Vitality members are for engaged Vitality members are 10101010% % % % ––––40404040% lower than non% lower than non% lower than non% lower than non----engaged members for nonengaged members for nonengaged members for nonengaged members for non----chronic chronic chronic chronic conditionsconditionsconditionsconditions
Study Study Study Study 2222: Chronic conditions: Chronic conditions: Chronic conditions: Chronic conditionsHospital costs Hospital costs Hospital costs Hospital costs for engaged Vitality members are for engaged Vitality members are for engaged Vitality members are for engaged Vitality members are 10101010% % % % ––––30303030% lower than non% lower than non% lower than non% lower than non----engaged members for chronic engaged members for chronic engaged members for chronic engaged members for chronic conditionsconditionsconditionsconditions
Study Study Study Study 3333: Longitudinal fitness study: Longitudinal fitness study: Longitudinal fitness study: Longitudinal fitness studyAdmission rates are Admission rates are Admission rates are Admission rates are 10101010% lower, length of stay in hospital % lower, length of stay in hospital % lower, length of stay in hospital % lower, length of stay in hospital 25252525% lower and % lower and % lower and % lower and in combination, hospital in combination, hospital in combination, hospital in combination, hospital cost per patient cost per patient cost per patient cost per patient 14141414% lower for highly engaged Vitality members relative to % lower for highly engaged Vitality members relative to % lower for highly engaged Vitality members relative to % lower for highly engaged Vitality members relative to members not registered on Vitalitymembers not registered on Vitalitymembers not registered on Vitalitymembers not registered on Vitality
32
Discovery’s Shared Value insurance cycle
32
Members engage in their health &
wellness
01
Members change their behavior
02
Members achieve improved health
outcomes
03
Insurers/employers experience better
claims performance & greater savings
04
Insurers channel actuarial profit into
incentives
05
Members are rewarded for their
improvements
06
Economic value
generated
Economic value
shared
Healthier members stay & join
07Society benefits from
improved health & productivity
33
Funding of benefits
Member contribution Discounts and funding frompartners
Actuarial surplus Incentives and lowerpremiums
Profit to insurer
±$10 per member per month
Access to wellness partners and network
Indicative of commitment to better health
Better healthcare experience
Better mortality
Better lapses
34
Traditional insurance pricing models are not optimal
Level premium
Timeline
35
Blue Bronze Silver Gold
Led to the development of dynamic pricing
Vitality Integrated Insurance ModelExample: Whole of life Insurance
Dynamic pricing and behavior changeDynamic pricing and behavior changeDynamic pricing and behavior changeDynamic pricing and behavior change
Significant Significant Significant Significant upfront upfront upfront upfront premium premium premium premium discounts of up discounts of up discounts of up discounts of up to to to to 20202020% creates % creates % creates % creates positive positive positive positive selectionselectionselectionselection
Market premiumMarket premiumMarket premiumMarket premium
1111
2222
Accurate Accurate Accurate Accurate pricing leads pricing leads pricing leads pricing leads to selective to selective to selective to selective lapses of lapses of lapses of lapses of unhealthy unhealthy unhealthy unhealthy lives (to lives (to lives (to lives (to other other other other insurers etc.)insurers etc.)insurers etc.)insurers etc.)
3333
36
Impact of the dynamic pricing model
Dynamic pricing modelDynamic pricing modelDynamic pricing modelDynamic pricing modelBetter health selectionBetter health selectionBetter health selectionBetter health selection
Non-Integrated Integrated
21212121% % % % better claims
experience for integrated members
1111
Members who stay
had a 2222x x x x better better better better mortality mortality mortality mortality
experienceexperienceexperienceexperience
In-force All Lapses
Claims experience Mortality experience
3333Selective Selective Selective Selective lapsationlapsationlapsationlapsation
37
Vitality Active Rewards with Apple Watch
Achieve your fitness goal
Get active Get rewarded
Get rewarded every week with a free coffee from
Starbucks
Receive an Apple Watch
Get your Apple Watch for free by
achieving your monthly goals
38
Rationale for Vitality Active Rewards with Apple Watch
Theory of loss aversion and Utility
UTILITY
LOSSES GAINS
Benefit design
Get Active Achieve your goals Get Rewarded
Watch repayments linked to engagement
u
-2u
39
Apple Watch encourages 2x average weekly activity levels for device users after activating active rewards
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
-11%
+66%
+96%
Not enrolled Active Rewards With Apple Watch
Average level of physical activity before and after the launch of the benefit
Pre Active Rewards Physical Days per Week Post AR Physical Days per Week
40
Poor and average Good and excellent
Vitalitydrive in motor insurance
34343434%%%%
Better drivers have fewer accidents
DISCOVERY INSURE DRIVERS CURRENTLY HAVE DISCOVERY INSURE DRIVERS CURRENTLY HAVE DISCOVERY INSURE DRIVERS CURRENTLY HAVE DISCOVERY INSURE DRIVERS CURRENTLY HAVE 1111////3 3 3 3 OF THE SOUTH AFRICAN ROAD FATALITY RATEOF THE SOUTH AFRICAN ROAD FATALITY RATEOF THE SOUTH AFRICAN ROAD FATALITY RATEOF THE SOUTH AFRICAN ROAD FATALITY RATE
1111Reward good driving behaviour with up to 50% back on fuel based on how you drive
2222Use technology to provide regular feedback and more detailed analytics
OVER 100 MILLION KILOMETRES OF DRIVING DATA COLLECTED.
3333
Telematics measures driving behaviour
41
United States of AmericaCanada
GermanyFrance
ChinaSouth AfricaUnited Kingdom
SingaporeAustralia
Hong KongThailand
MalaysiaPhilippines
South Korea
NETWORK
42
Recognised globally
Fortune’sChange the World list
Harvard Business School Michael Porter
McKinsey Quarterly International media
Bending the q(x)’s: Where Actuarial and Behavioral Sciences meetMonty Hilkowitz FIA