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'All Gloves Are Off': How Insurtechs Could Disrupt Health Plans

Analysis  |  By Gregory A. Freeman  
   June 13, 2018

Technology companies are reinventing the insurance industry, and health plans are looking for ways to take advantage of their expertise. 

Companies in the health insurance business are looking to do to health plans what Uber did to the taxi business: Use technology to create an entirely new, customer-friendly approach to a traditional business model.

Insurtechs—companies using technology to improve efficiency and lower costs in the insurance industry—are bringing new approaches to various facets of the insurance industry.

The number of insurtechs is growing rapidly, financed by billions of dollars in venture capital, says Bill Fox, JD, chief strategist for global healthcare, life sciences, and insurance at MarkLogic, a database company. Some of the biggest players are companies such as Metromile, Oscar, and Insureon.

These companies are not looking so much to bring technological solutions to stodgy old insurance companies, however. Rather, they are creating entirely new ways to sell insurance and service customers, Fox says.

They are driven in part by the customer-centric business trends that have made businesses such as Uber and Airbnb so successful, he says.

"They are skipping right over the problems that 200-year-old insurance companies have with legacy architecture and old databases to ask how they can do insurance the way Amazon and Uber do business," he says.

"The insurtech movement is saying they can take a piece of the insurance business, completely free it from the technical restraints, and make it low-ball, customer-centric, omni-channel, frictionless. If I can sign someone up for life insurance in 15 minutes instead of it taking months, with all that paper involved, I'm going to take over this industry. I'm going to disrupt it," Fox says.

Some Insurance Lines Changing

That is already happening in some insurance industry channels, with Lemonade, for example, now selling renters insurance in 26 states after only two years.

Fox expects insurtechs to disrupt the healthcare industry in the same way by creating new ways to market health insurance, playing into the continuing trend for consolidation.

Recent moves such as the health plan announced recently by Amazon, JPMorgan Chase, and Berkshire Hathaway, as well as the Cigna-Express Scripts and Walmart-Humana mergers are feeding the insurtechs' confidence that this is the right time to shake things up, Fox says.

"All gloves are off now as far as what's a healthcare company, what's an insurance company, what's a financial services company," Fox says.

"There used to be this idea of owning the covered life, with everyone wanting to be like Kaiser, Intermountain, and Geisinger in the way they owned both the insurance of the patient but also oversaw the care from the moment they walked into the doctor's office, through the hospital visit, and on to maintaining the chronic condition. That's open to everybody now," he says.

Legacy Insurers Want to Play

Traditional insurers are acknowledging this likely future by creating venture funds that provide capital for insurtechs, keeping themselves in the game.

Nationwide recently launched a $100 million venture fund to support "next-generation experiences for Nationwide’s customers by exploring leading-edge topics from analytics and automation technology to new insurance and financial services platforms," as written on their website.

"Their job is to find these insurtechs that can accelerate their innovation so they don't get left behind," Fox says.

"It's going to be really hard to disrupt a UnitedHealth with 60 million insureds or an Anthem with 20 million insureds, but what they can do is change the business model so that these large legacy insurers can buy into that quickly," he says.

Fox notes that the organizers of the Amazon-JPMorgan Chase-Berkshire Hathaway deal are having a difficult time finding a CEO to run the organization because they realize that the data and technology driving the future requires someone who is more than just a good business leader.

"They've interviewed many of the usual suspects and no one so far has had the right skill set. That's because most senior executives in these organizations have a lot of knowledge about one thing, usually banking and financial services or payments and risks, and the Amazon people understand retail," Fox says.

"But to find an executive who can empower an organization to get the synergy from those things and embrace the data and technology necessary to more forward? That's hard," he says.

Less Room at the Top

Insurtechs will push the bigger and more innovative health plans to success, but the more mediocre insurers will suffer, Fox says.

"I think it's going to be very good for the ones that quickly make the big moves to become digital businesses," Fox says. "With these various kinds of businesses being built—the pharmacies joining with retailers, organizations that understand the world is changing around them will do very well."

As some of the biggest players in healthcare join forces and leverage their mutual data capabilities, insurtechs may be either the way they make it work or their new competitors.

"If you take too long or make the moves that could be successful, but you're dragged down by your legacy technology and the legacy people tied to that technology, it's going to be harder to stay in the middle. We're seeing across industries that there are fewer big winners and more losers," Fox says.

"All of these big mergers we're seeing in the healthcare arena seem to make sense for those companies, with obvious benefits, but it's going to come down to what they do with it and what kind of traction they get out of that data they traditionally ran their businesses on. Can they get these entrenched healthcare systems to move quickly to a better way of doing business?" he says.

Gregory A. Freeman is a contributing writer for HealthLeaders.

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