Swiss Re: H&W programs can improve life insurers’ mortality and lapse experience 3-4%

A Swiss Re study has shown that a US insurer that runs a health and wellness (H&W) program on term life products can achieve significant improvements on mortality and lapse rates, with the reinsurer suggesting that a successful program with even a 25 percent engagement rate can be ROI positive.

Heather Majewski, head of L&H solutions Americas, reinsurance solutions at Swiss Re, said a common question that insurers ask her is whether they should be doing something in the H&W space.

“And then the second most common question is, ‘Well, what is the actual impact of it?’ They want to know whether they break even on a program like this and whether it is a positive ROI.”

To help answer these questions, Swiss Re recently published a report that concluded H&W engagement programs are a great way to help policyholders lead longer, healthier lives as well as lead to a positive return on investment for insurers if done right. 

The report stated that a US insurer that runs a successful H&W engagement program on a fully underwritten term life product may see an aggregate mortality and lapse experience reduction of up to 3 to 4 percent across their entire book of business, with more than half of the overall benefit coming from true policyholder behaviour change.

For its part, Swiss Re in the report said: “We will stand behind the estimated mortality and lapse savings with preferential reinsurance rates that align with your specific engagement program.”

H&W programs help build customer relationships 

The report notes consumers have more data about their health and lifestyle than ever before because of the proliferation of health apps and wearables. It said consumers are often willing to share their data if they see the value in doing so.

Swiss Re suggested that engaging with customers on H&W can benefit all parties, with customers buying more relevant products at the right price point and experiencing improved health and longevity.

It also allows insurers and reinsurers to build customer relationships “that go beyond a policy in a drawer and an annual bill – resulting in better mortality and persistency and maximising the lifetime customer value,” the report said.

And society as a whole benefits from people being healthier and better protected financially.

“The more consumers engage in their health and wellness, the more it’s going to benefit themselves, society and insurance companies,” said Majewski. “That’s a win-win-win. We call that shared value. That’s a powerful story to many insurance carriers.”

However, despite recognising the opportunities that H&W programs present, some insurers struggle to quantify the impact and make the case for launching one. 

Swiss Re’s experts believe that an appropriately structured program can not only help policyholders improve their wellbeing but also strengthen their loyalty. This brings long-term commercial benefits to insurers.

The reinsurer’s model suggests a 3.8 percent aggregate mortality and lapse experience reduction across a book for a US insurer initiating an H&W engagement program that engages 40 percent of policyholders on an ongoing basis.

For programs with a 25 percent engagement rate, Swiss Re estimates an aggregate mortality and lapse experience reduction of up to 2.2 percent across the entire book of business.

Swiss Re’s analysis of the costs and benefits of launching and running an H&W engagement program suggests a successful program with a 25 percent engagement rate can be ROI positive, and at 40 percent engagement can increase profitability by up to 9 percent compared with not having an H&W engagement program.

The report outlines that a successful H&W engagement program will have a clear target audience, an effective strategy for reaching the target audience, and a unique and compelling design to keep people coming back. 

The main driver of improved mortality through an H&W program is physical activity. 

Target newer customers first

There is only one such program in the US today that is integrating H&W into the actual premiums: the Vitality program from John Hancock.

“There’s probably five to 10 other insurance companies who are offering engagement programs, but more from a sort of piloting and testing type of standpoint as opposed to actually doing the full integration,” said Majewski. 

Before joining Swiss Re in 2020, Majewski was head of wellness innovation for John Hancock Insurance, where she was instrumental in the development and launch of the Vitality program.

Majewski suggests a number of ways insurers can successfully implement an H&W program.

“In order to maximise the impact, first, you have to start with the take up of it,” she said. “You really need to be able to reach your audience in order to do that. For example, if you’re trying to reach an in-force audience of customers who’ve been with you for 20 years and never heard from you before, it’s going to be a lot more difficult than if you’re starting with a brand new customer.”

Majewski continued: “So I would encourage companies to start with their newer customers, and have a clear target audience. Engage the distributor as well, because if the distributor who’s selling the insurance to the customer is engaged then you have a higher likelihood of the customer being engaged as well.”

The program also has to be compelling with the right incentives. 

Once people are engaged, insurers need to maximise the impact of the program. Insurers should start with small changes, Majewski suggests, so that they are attainable. 

“If you’re trying to encourage somebody who sits on the couch and watches TV at night to go run a marathon, that’s not going to happen,” she said. “You just want them to get up and go for a walk around the block after they’re done with dinner. So it’s got to be small changes.”

In addition, a lot of studies show that customers need to be financially incentivised and that if these incentives stop then the behaviour stops. 

In its report, Swiss Re noted that buying and owning a policy does not feel much different today than it did two decades ago. It said while insurers, reinsurers, distributors and policyholders can agree that greater personalisation is needed, the challenge is how to make this happen.

H&W programs can help achieve this. 

“I definitely think a mindset change is needed, because any time you’re innovating and doing something new you really have to open your mind and see the long-term benefits of something like this,” Majewski said.

She added that the role of reinsurers is not just to have a financial arrangement with carriers but to be adopters of new innovation.

“We have lots of insurtech companies, newer innovators, that are coming to us looking for validation,” she said.

“We see our role is to vet those processes for insurers as a whole. If they can trust their reinsurer to do some of that work for them or at least be a baseline for their work, then it makes it easier for insurance carriers to adopt new innovation.”