ubi - payl_brochure_05nov15

Introducing ‘Pay As You Live’ (PAYL) InsuranceInsurance that rewards a healthier lifestyleAugust 2015

“Those who think they have not time for bodily exercise will sooner or later have to find time for illness.”Edward Stanley (British Statesman)

2 Introducing ‘Pay As You Live’ (PAYL) Insurance

We are all leading busier lives. In between juggling family, professional and other commitments, most of us are finding less time to focus on ourselves and our own personal wellbeing. This behaviour is contributing to the sustained increase in chronic, preventable disease — which annually contributes to 60% of deaths globally.

It begs the question: Do life and health insurers have a role to play in helping their customers reduce the risk of chronic disease? How might insurers create products that proactively encourage and reward healthier living?

For years, forward-thinking insurers have conceptualised Pay As You Live Insurance. EY, with its usage based insurance team, is helping turn this concept into reality.

Key question for insurers:

How to help reduce preventable diseases with customers and the broader community while improving long-term profitability?

Figure 1 Annual mortality rate from Chronic Diseases

38 million people die from chronic disease annually• 6 million deaths

are tobacco related

• 3.2 million deaths are caused by insufficient physical activity

• 3.3 million deaths are caused by harmful drinking

• 1.7 million cardiovascular deaths are caused from excess salt intake

56% Cardiovascular diseases 26% Cancer 13% Chronic respiratory diseases 5% Diabetes

3


How to create competitive advantage through leveraging digital technology?

Trends creating opportunities in Pay As You Live insurance

Growth of preventable lifestyle diseasesChronic diseases are expected to account for as much as 73% of all deaths by 2020. Also referred to as ‘lifestyle diseases’, they include: type two diabetes, cardiovascular disease, cancer and lung diseases. Although genetics and environmental factors play a role, controllable behaviours such as smoking, diet, exercise, sleeping patterns and stress are the most significant causes.

In other words, the majority of these diseases can be prevented by leading a healthier lifestyle. The World Health Organisation (WHO) suggests that the risk of such diseases can by reduced by up to 31% if an adult participates in a minimum of 150 minutes of moderate intensity aerobic activity throughout the week — just over 20 minutes of exercise per day.

Potential for digital technology to improve health outcomesWith 1.8 billion internet-ready smartphones already in existence, the wearables fitness tracker market is set to become a $30 billion industry by 2018. These devices are already helping billions of people combat lifestyle diseases through the likes of Nike+ (more than 18 million users) and the 7 Minute Workout Apps (more than 10 million installs). Health and fitness apps are the fastest growing category on iTunes and Android.

This, combined with the adoption of online social networking in healthcare, gives insurers access to an unprecedented amount of data and insight into customer behaviors. Leveraged correctly, this will inform premium pricing and unlock new value for insurers, customers and the broader community.

Figure 2Converging disruptive innovation trends

The internet of everything

connected devices by 2018

$8bn

Health applications

applications dedicated to health and fitness

Nike+ (18m+ users)

7 Minute Workout (10m+ downloads)

100,000+

Wearable devices

industry by 2018$30bn

Social media & online communities

Message boards & blogs

Social networks

“Breaks down the walls of patient-provider communication”

Statistics have been sourced from: http://www.who.int/mediacentre/factsheets/fs355/en/EY Digital Sate of the Nation, Digitaltrends.com, PHA Australia


Disintegrating customer loyaltyFindings from EY’s recent Global Customer Insurance Survey (Figure 3) highlight the industry’s growing problems with consumer relationships. Trust is falling. Switching is on the rise. PAYL-type solutions will play an important role in helping insurers to build more meaningful and ‘stickier’ relationships with their customers.

Figure 3 EY’s Global Customer Insurance Survey findings, insights and considerations


How to attract, deepen and retain customers to drive greater value from new and existing relationships?

To reduce attrition, and increase engagement insurers can leverage technology and data to differentiate on experience and price, increasing the perceived value of their offerings.

27%

43%

30%

40%

34%

26%

50%Cost/terms

47%38%

28%28%

26%

Global life

25%24%24%22%

20%

57%42%

29%16%

26%14%

20%11%

17%18%17%

59%48%

39%34%

31%26%30%

25%29%

26%26%

Policy benefits/coverageRecommended by broker, friends

Frequency/relevance of communicationLevel of service received

Policy did not align to my life circumstancesResearch I conducted

Experienced personal/family milestonesBrand reputation

Did not like the way claim was handledCustomer loyalty benefits

Global auto Global home

AdvocacyLikelihood to recommend

More than once a year Once a year or less Never

Current Preferred Current Preferred Current Preferred

10%

67%

23%

18%

56%

26%

9%

68%

23%

17%

45%

38%

9%

61%

30%

18%

55%

27%

Global developing markets

Att

riti

onCl

osed

a p

olic

y in

the

last

18

mon

ths

38%38%37%

59%58%

Very Likely

Likely

Neutral

Unlikely

Very unlikely

0% 100%25% 50% 75%

Total

Preferred Current Preferred Current Preferred

44%

29%

27%

24%

45%

31%

27%

27%

46%

13%

43%

44%

Policy updates

Special deals/promotions

Global mature markets

Generalinformation

Policy updates


Generalinformation

Current

27%

43%

30%

40%

34%

26%

50%Cost/terms

47%38%

28%28%

26%

Global life

25%24%24%22%

20%

57%42%

29%16%

26%14%

20%11%

17%18%17%

59%48%

39%34%

31%26%30%

25%29%

26%26%










10%

67%

23%

18%

56%

26%

9%

68%

23%

17%

45%

38%

9%

61%

30%

18%

55%

27%


Att

riti

onCl

osed

a p

olic

y in

the

last

18

mon

ths

38%38%37%

59%58%

Very Likely

Likely

Neutral

Unlikely

Very unlikely

0% 100%25% 50% 75%

Total


44%

29%

27%

24%

45%

31%

27%

27%

46%

13%

43%

44%

Policy updates



Generalinformation

Policy updates


Generalinformation

Current

27%

43%

30%

40%

34%

26%

50%Cost/terms

47%38%

28%28%

26%

Global life

25%24%24%22%

20%

57%42%

29%16%

26%14%

20%11%

17%18%17%

59%48%

39%34%

31%26%30%

25%29%

26%26%










10%

67%

23%

18%

56%

26%

9%

68%

23%

17%

45%

38%

9%

61%

30%

18%

55%

27%


Att

riti

onCl

osed

a p

olic

y in

the

last

18

mon

ths

38%38%37%

59%58%

Very Likely

Likely

Neutral

Unlikely

Very unlikely

0% 100%25% 50% 75%

Total


44%

29%

27%

24%

45%

31%

27%

27%

46%

13%

43%

44%

Policy updates



Generalinformation

Policy updates


Generalinformation

Current

Figure 2Converging disruptive innovation trends

Assessment of the top reasons a customer might close a policy indicates that insurers need to find ways to unlock greater value in customer relationships while remaining competitive on price

The relationship between advocacy and loyalty is changing. Even advocates have a high tendency to switch — a fresh approach to building and maintaining loyalty is required

Customers want more, meaningful interactions with insurers and many are willing to hear from their insurers 2+ times a year for relevant information, policy updates and special deals/promotions

5

The Pay As You Live (PAYL) Proposition

What it isPAYL is a relatively new insurance concept aimed at improving controllable behaviours to reduce premiums and reward customers. It involves the insured person providing ongoing data to the insurer about their lifestyle through existing and new data sources (e.g. wearable technology) and the insurer encouraging customers to live a healthier lifestyle to reduce the risk of chronic illness.

Users can also track their own habits through an easily accessible mobile interface, using the data to monitor and alter behaviours, such as diet and exercise, to improve health outcomes. Insurers can use the behavioural data generated to personalise solutions based on a heightened understanding of a customer’s health status and relevant risk factors. This in turn provides the policy holder with rewards and discounts.

The broader PAYL ecosystemPAYL is about more than just using wearable data to inform underwriting. It offers the potential to create an ecosystem of health and wellbeing related goods and services that add value to the customer, the insurer and the broader community as a whole.

In forming a snapshot of a customer’s overall wellbeing and health status, insurers can use insights and data from ecosystem interactions. For example:

• Tracking fitness activities from wearable devices

• Leveraging private health data

• Integrating EY’s 25+ years of longitudinal wellbeing data to inform a more complete customer ‘snapshot’

Although some insurers are making obvious plays in this direction, very few have successfully integrated individual health data to a smart underwriting engine to adjust premiums based on new pricing variables.

How it works

Policy Holder InsuranceBehavioural data is included for loyalty programs and in policy pricing

User InterfaceData is passed to insurer through wearable interface

User Interface and communications link positive behaviour to insurance policy with price signal re-enforcing benefits of lifestyle

Policy-holder changes behaviour for improvedhealth outcomes and lower premiums

Uses wearable devices to manage their health outcomes

Data

Pricing

CRM


PAYL benefits

Benefits to the insurer• Access to new and real time

customer data for portfolio risk and claims optimisation

• Projects innovation to help attract new customers who want to lead healthier lifestyles

• Enables personalised experience to improve engagement with customers and deepen existing relationships to improve customer ‘stickiness’ and retention through increased customer satisfaction

• Actively encourages digital interaction to reduce long term costs to serve

Benefits to the customer• Opportunity to actively take charge

of their own health and lead longer, healthier lives

• Customers can track their own lifestyle and set goals to improve their habits

• Access to rewards such as premium discounts or access to partner benefits (gym memberships, healthy eating programs, healthcare discounts)

• Real time interaction will allow customers to keep their cover up-to-date and relevant for their needs

Benefits to the community• Improved community health

outcomes due to healthier living

• Reduced strain on public infrastructure and resources dedicated to the treatment of chronic illness

• Reduced premiums off the back of reduced claims. This will improve the affordability of life insurance within the broader community

• Demonstrating the greater, foundational purpose of insurance – communal risk coverage (purpose-led)

7

Introducing the PAYL prototype

A working PAYL prototype has been created to prove the feasibility of this type of solution.This prototype solution has already been tested with different variables and is ready for demonstration. Working with EY, insurers can co-develop a tailored version, adapted to meet their business needs and telematics strategy.

The PAYL prototype is based on the proven ‘Pay As You Drive’ (PAYD insurance platform, which has been successfully deployed in Europe and North America. Instead of vehicle telematics, wearable technology provides daily lifestyle data to the prototype and a mobile accessible interface reports on lifestyle variables to inform premium pricing. The two concepts have sufficient commonality for the PAYL prototype to leverage substantial elements of the proven PAYD solution. See Figure 4.

For proof of concept purposes, the prototype is based on a hypothetical insurance company, supported by an actuarial ratings engine that uses activity inputs such as pricing variables. It can be accessed through an interactive dashboard that allows customers to monitor their health data and performance goals, with Bluetooth connectivity to wellbeing devices such as Fit Bits, watches and electronic scales.

All testing data has been recorded to support ongoing pricing optimisation.

Figure 4Path to value for PAYL leverages learnings from the successful deployment of PAYD and other usage based insurance solutions

Evolved understanding of traditional pay as you use solution

(e.g. vehicle telematics) to build PAYL

Inputs (Driver)

User Interface

CRM

Policy System

Pricing Engine

Data

Infrastructure

Policy System

Development effort is required to configure the technology for a new instance which takes wearable inputs rather than driver inputs. The prototype has been built to successfully interface to wearables.

Pay As You Live

Pay As Y

ou D

rive


Features

1. Fast, smart sign up• Clean and simple messaging to educate

customers on the PAYL proposition

• A working actuarial pricing engine to provide easy, quick quoting for seamless activation

• Direct invoicing instantly set up from the platform

3. Simple to use• Through a desktop or a user-friendly smart

phone interface

• Log in to access a personalised dashboard that leads the user through the process with step-by-step instructions

• Incorporates tools for customer management and billing

2. Personalised goals• Set personal performance data goals

• Monitor progress over time

• Earn rewards for achieving or exceeding goals

9

Where to from here?

EY is looking for forward-thinking insurers to co-develop this solution for rapid deployment to market. Through a series of focused sprints (Figure 5) we will work with you to:

• Assess strategic fit and identify appropriate path to value using a workshop-led approach

• Refine the working prototype and run experiments to prove the viability of this solution

• Develop the customer value proposition, product and operating model requirements for delivery to market

• Assist deployment of the solution with a minimum viable product, track benefits and create a closed feedback loop for solution refinement

It is an exciting prospect to be a market leader through innovation — it is something our thought leaders are passionate about. With only a short window for first-mover advantage, now is the time to act. Or as the saying goes, “disrupt or be disrupted”.

Feedback loop and iteration

• Strategic alignment• Clear path to value

• Working prototype• Successful experiments• Proven viability

• Customer value proposition• Product design and pricing• Operating model requirements

• Successful deployment of minimum viable product• Data capturing• Benefits tracking

Strategic Assessment and Business Model

DesignProof of concept

Solution design

Go to market

Launch

Desired outcome

1

2

3

4

5

Figure 5EY proposes an accelerated and collaborative approach to leverage the existing prototype to develop and launch a tailored solution for your market

Contact us to discuss the potential for developing the PAYL prototype in your business.


Our PAYL and digital thought leaders

EY’s global network of insurance, technology, actuarial and customer strategy specialists are ready to help you take an end-to-end PAYL solution to market.

Walter PoestcherPartner, EY Insurance StrategyTel: +61 2 9258 [email protected]

Walter heads our Oceania insurance practice and is leading EY’s telematics initiatives

Rodney PrescottSenior Manager, IT Advisory Tel: +61 2 9276 9959 [email protected]

Offering expertise in IT Advisory, Rodney can assist with the provision of technology services

Richard SuhrPartner, EY APAC Digital Lead Tel: +64 4499 [email protected]

Richard leads EY’s Digital practice in the Asia-Pacific with a focus on building and deploying new digital service offerings

Chris O’HehirPartner, Advisory Tel: +61 2 9248 [email protected]

Chris leads EY’s Analytics and Modelling practice for financial services in the Asia-Pacific and is a team leader in Actuarial services

Jonathan ZhaoAsia-Pacific Insurance Leader & Head of Actuarial Services Tel: +852 2846 [email protected]

Joel LimPartner, Advisory Services Tel: +852 5363 2115 [email protected]

11

About EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organisation, please visit ey.com.

© 2015 Ernst & Young, Australia. All Rights Reserved.

APAC No. AUNZ00000555 S1528050 ED None

This communication provides general information which is current at the time of production. The information contained in this communication does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Ernst & Young disclaims all responsibility and liability (including, without limitation, for any direct or indirect or consequential costs, loss or damage or loss of profits) arising from anything done or omitted to be done by any party in reliance, whether wholly or partially, on any of the information. Any party that relies on the information does so at its own risk. Liability limited by a scheme approved under Professional Standards Legislation.

ey.com

EY | Assurance | Tax | Transactions | Advisory

ubi - payl_brochure_05nov15

Documents