Smart Mental Health Insurance—The Key to Insurtech Industry Domination?

Insurtech innovations targeting mental health present a lucrative gateway to establishing a strong share of 2020’s estimated $1.6 trillion global health insurance market.

Insurtech: the Future of Insurance
What is Insurtech?

Insurtech describes technology innovations that are driving the insurance industry towards more modern, cost-effective, time-effective, and efficient models and practices.

Essentially, insurtech uses technological advances in areas like artificial intelligence, big data, machine learning, and the Internet of Things (IoT), to address the current challenges and gaps in the industry. Fundamentally, insurtech is all about improving top-line sales, bottom-line profitability, and the customer experience.

There is a whole host of continually and rapidly developing insurtech applications that are disrupting otherwise limited traditional insurance models and practices, like policy creation, underwriting, and claims management.

Applications include:

• fully digitized application processes
• claim automation and acceleration tools
• attending to today’s tech-savvy consumers with smartphone apps and wearables for ultra-personalized policies, incentives, and rewards
• using new streams of real-time data from such Internet-enabled devices in individual consumer risk development and dynamic premium pricing systems

The Time is Now for Insurtech Marketplace Establishment

In line with industry projections, as put by Rick Huckstep, the Chairman of The Digital Insurer and a keynote speaker and thought leader on insurtech:

“The lines between the old and new will blur into one as insurtech becomes mainstream by 2020…This will lead to the creation of whole new digital brands, designed to cannibalize traditional business.”

Insurtech is on the rise:

• It is estimated that by 2020, three in every four insurance policies will involve digital channels during either the pre-purchase, purchase, or renewal stages.
  
  
• According to an online community of innovators and investors, Innovators Edge, Insurtech is now a global phenomenon, with well over 1,000 startups in more than 60 countries in 2015 alone.
  
  
• As reported by Business Insider Intelligence, funding has promoted the transition from start-up to scaling-up, while legacy players have moved beyond initial experiments and are starting to implement new technology throughout their businesses.
  
  
• More insurtech vacancies are being created. In the UK for example, the number insurtech jobs increased 22 times faster per month than the rest of the UK job market in 2017 (research from metasearch engine Joblift).
  
  
• According to Willis Towers Watson’s 2018 insurtech industry briefing, insurtech has 4 times the number of investors than in 2012, with nearly $9.0 billion of disclosed capital committed.

The bottom line? The rate at which insurance companies and incumbents successfully employ insurtech and adapt to inevitable market changes and demands will determine the size of their share in the next generation of the insurance industry, irrespective of the sector.

The Mental Health Key to Insurtech Success
Mental Health: a High-Value Target for Smart Insurance

Insurance companies are developing and investing in insurtech, either in-house or by acquiring, investing in, or hiring technology startups as service specialists. A high-priced example is the recent $60 million Allianz investment in American Well, a telemedicine platform for remote monitoring of physical health conditions.

In Deloitte’s insurance outlook report for 2018, “Shifting Strategies to Compete
in a Cutting-Edge Future”, insurers are encouraged to make use of insurtech across
their organizations—as part of an offensive strategy to expand their market share and a defensive measure to fend off potential competition from nontraditional insurtech companies.

As opposed to end-to-end solutions, another choice strategy for insurtech market penetration is to initially target particular value pools in the sector.

By focusing on a specific problem or untapped value within a sector that is crying for insurance innovation, like mental health insurance, there is the added bonus of more easily circumventing the jurisdictional legal baggage that comes with conforming to the full regulatory framework—a longstanding challenge for insurance industry innovation in general.

Mental Health Insurance is Ripe for Insurtech Innovation

The mental health industry is currently experiencing a similar technological revolution in the provision of an unparalleled level of personalized therapy and support, delivered in real-time using the IoT.

Known as augmented mental health, the future of the mental health industry simultaneously overcomes many problems that limit mental health insurability—a causal factor in the current mental health crisis.

The primary problem is the historically subjective nature of assessing mental health.

There is no blood or DNA test that objectively guarantees an individual has a particular mental health problem or diagnosis, only the therapist’s perspective, the client’s perspective, and secondary evidence related to impaired performance in daily living or at work can be used.

With the development of advanced algorithms to objectively monitor emotions and mental states from wearable biosensors and smartphone usage data (that sparked the augmented mental health era), the restraints that subjectivity places on the evolution of both mental health insurance and mental health care are lifted.

The Insurance Benefits of Augmented Mental Health
There are perhaps no better value pools set to have bigger payoffs than those in the mental health sector

1. Insurer as Partner in Disease Management
   Augmented mental health platforms are essentially taking mental health insurance from reacting-to-risk models to preventing-risk models.
   
   In the augmented mental health era, the insurer can be notified when an individuals mental health profile is displaying early warning signs and trending towards subclinical mental illness, the onset of mental illness, or indicates recurrence—creating a window of opportunity to respond proactively.
   
   Risk prevention becomes risk protection as the insurtech itself and the data it provides permits rapid round-the-clock immediate access to highly personalized treatment as and when needed, where poor mental health care access is one of the biggest contributors to the mental health insurance crisis.
   
   Shockingly, a recent British Medical Association investigation indicates that in the UK, patients with serious mental health issues leading them to self-harm or attempt suicide are being left to wait as long as two years for specialist support.
   
   Importantly, augmented mental health systems can overcome the often month-or-more long wait for outpatient mental health care that can incubate mental illness and lead to poorer responses to treatment. The worst-case scenario, the wait can lead to the development of costly, treatment-resistant mental illness or even death.
   
   Ultimately, the objective data that such mental health insurtech provides is a very attractive selling point for network growth, as it helps mental health professionals diagnose, evaluate, and treat patients more effectively and efficiently than ever before.
   
   
2. Claims Management
   Recent technological advances, like those in the field of artificial intelligence, can lead to smarter, more streamlined, and near fully automated claims processing tools. This could also help solve the issues with lengthy mental health evaluation processes and delays on the receipt of care (frequently 30 days and more).
   
   Moreover, the often interrogative mental health claims process that can put a mental illness sufferers health at further risk can be replaced with processes that rely on objective mental health data to confirm or refute diagnoses.
   
   
3. Evidence-Based Policymaking Using Big Data
   Emotional and behavioral data related can be used either for better claims management approaches but it can also be used for product design for insurance policies that better facilitate customer treatment and recovery, as well as the bottom line.
   
   Advanced analysis of such big data could be used for a whole host of purposes, from lowering the costs and improving the results of customer acquisition initiatives or the design products and strategies for better customer retention for example.
   
   
4. Dynamic Pricing and Continuous Underwriting
   Augmented mental health data can be used for continuous underwriting and novel risk assessment models in the mental health insurance space.
   
   With continuous underwriting and pricing (also known as dynamic underwriting and pricing), premium pricing dynamically fluctuates based on the continual analysis of risk from real-time data (as opposed to assessing a client's risk once and then basing all future premiums on the result).
   
   
5. Reduced Mental Health Care Costs
   While all of the aforementioned mental health insurtech benefits are revenue building, augmented mental health platforms can instrumentally reduce the costs of healthcare directly, and the indirect costs of productivity loss.
   
   Costs can also be reduced through moving towards universal mental health care access by breaking down known access barriers, such as high treatment cost, living in remote locations, or the negative stigma surrounding mental illness.
   
   Extreme treatment delays and the majority of sufferers not receiving treatment (as is found in the US and other countries), worsening mental health and incubating treatment resistance as found in untreated depression, are arguably the most costly.
   
   Research on 19.1 million consumers insured through US Fortune 500 companies found that annual health care costs (direct and indirect) were roughly double per year ($17,261) for employees with treatment-resistant depression compared with those with non-treatment-resistant depression ($9,790), quadrupled in comparison to those without depression ($4,782).
   
   As more financially attainable care, digital health addressing challenges with patient visits, ongoing patient management, and self-care, like augmented mental health, could generate an economic value of approximately $10 billion annually across the US (Accenture Consulting).
   
   
6. Benefits for Reinsurers
   Reinsurers employing mental health insurtech from the rapidly developing augmented mental health industry can position themselves as innovative reinsurers, introducing technological solutions to mitigate the tremendous risk in the current portfolios of life and health insurance companies.
   
   Additionally, both reinsurers and ceding companies can safely test and evaluate an augmented mental health platform’s utility as innovative mental health insurtech solutions, before integrating into their own products.

References

Amos, T., Tandon, N., Lefebvre, P., Pilon, D., Kamstra, R., Pivneva, I., & Greenberg, P. (2018). Direct and Indirect Cost Burden and Change of Employment Status in Treatment-Resistant Depression. The Journal Of Clinical Psychiatry, 79(2), 24-32. doi: 10.4088/jcp.17m11725

Hassanalieragh, M., Page, A., Soyata, T., Sharma, G., Aktas, M., & Mateos, G. et al. (2018). Health Monitoring and Management Using Internet-of-Things (IoT) Sensing with Cloud-Based Processing: Opportunities and Challenges.

Kazdin, A. (2018). Expanding mental health services through novel models of intervention delivery. Journal Of Child Psychology And Psychiatry. doi: 10.1111/jcpp.12937

Slaughter, M., & Onu, T. (2018). Internationalizing InsurTech - A Global Phenomenon in Different Markets. The Insurtech Book, 88-90. doi: 10.1002/9781119444565.ch20

The Boston Consulting Group. (2014). Insurance @ Digital–20x by 2020.