Lifestyle has a big impact on your client’s health and life premiums
Financial advisers are more aware of the benefit to their clients of health and wellness than ever before. Discussions about morbidity and mortality, once the preserve of pricing actuaries at large insurers, now take place at insurance events, and in one-on-ones between adviser and client.
Clinical and lifestyle behaviours
Your writer attended a fascinating talk on the impact of clinical and lifestyle behaviours on health outcomes, presented by Dr Mosima Mabunda, Chief Clinical Officer at Discovery Vitality, as part of the popular Insure Talk series. The talk kicked off with the list everybody knows about but prefers not to hear: namely that alcohol abuse, poor nutrition, physical inactivity, smoking and inadequate screening drive much of the disease and death that we see in the world today.
This truth underpins many of today’s insurer and medical scheme wellness programmes. “Physical inactivity [alone] is associated with five million deaths each year,” said Mabunda, quoting World Health Organisation (WHO) estimates. She noted that the latest WHO recommendation is for individuals to be active for 150 to 300 minutes each week. Unfortunately, one in three adults are not as active as they should be, and the situation is worse among adolescents, with both statistics confirmed by Discovery’s data.
Poor nutrition was flagged as a major contributor to non-communicable conditions such as diabetes and heart disease. “South Africans consume twice as much sugar and salt and half as many fruits and vegetables as recommended,” Mabunda said, again based on Discovery’s stats. She singled out processed foods as the prime culprit. These revelations should not come as a shock to consumers, as the negative impact of the excessive consumption of alcohol and processed foods and tobacco use have been broadcast widely.
Early screening, big health benefit
The dangers introduced by inadequate screening are somewhat nuanced. According to the doctor, those who address the four aforementioned behaviours do themselves a disservice by not going for regular medical screenings. “Screening allows you to pick up a condition much earlier, and the earlier you pick it up, the more you can do to arrest its progression, and give yourself a better chance to manage the condition, avoiding complications and premature mortality,” she said.
Behavioural risk impacts both insurers and insureds, with the former carrying the treatment cost for non-communicable disease and / or paying out for death or disability. For insureds, the chilling fact is that non-communicable diseases are responsible for 60% of all deaths. “Diseases of lifestyle, driven by behavioural risk, are responsible for premature mortality and poor health span,” Mabunda said.
Much of the financial risk your clients face is driven by behaviour too. Well-known examples include loss aversion, where investors fear losses more than they value equivalent gains, and recency bias, where recent market events overly influence decision-making.
You may not be as healthy as you think
An insight that resonated with your writer was that an individual’s perception of his or her health tends to be skewed. So, in much the same way as 80% of people believe they are excellent drivers, the vast majority reckon they are in reasonable health.
Another useful behavioural insight lies in the concept of hyperbolic discounting. This refers to you or your clients’ tendencies to prioritise immediate comfort over long-term benefits. In a health context, that might mean skipping exercise or eating poorly today because the consequences, like diabetes or hypertension, feel too far off to matter.
The fact that indivduals are wired for immediate benefit is the cornerstone of many of the rewards programmes operated by financial institutions today, and Discovery is a leader and innovator in this field. “We understand that people are driven by immediate benefits, and we try and align our incentives and our rewards closer to when the client takes an action,” the doctor explained. “Our core purpose is to make people healthier and enhance and protect their lives, across all of our businesses.”
This is not a brand punt, dear reader, but a call to advisers to refocus their clients on these life-changing aspects. Programmes like Vitality are based on the scientific understanding of financial and health-related behaviours. They work by creating a reinforcing loop of action and reward, incentivising individuals to tackle each of the five negative activities introduced in the opening paragraphs. Members earn points for exercising, undergoing health checks or making healthier food choices. And the rewards escalate the more engaged they are.
Engaged insureds live longer, healthier lives
“Our health status is a proxy of a member’s health, or rather of a member’s engagement with the program,” Mabunda said, before sharing some eye-opening mortality stats. Vitality members on the lowest status have a far worse mortality status than those on the top tiers, with an average life expectancy of 67 years (blue) versus 87 years on gold or diamond. Interestingly, South Africa’s insured population also has a slight mortality ‘edge’ over the general population.
A central focus of the talk was cardio fitness, and specifically VO? Max, now recognised by the American Heart Association as a vital sign. Health and life insurers love this metric because VO? Max is closely correlated with health outcomes and hospital costs; the better an insured’s cardio fitness, the better it looks on the bottom line. Savings that accrue from an insured pool with overall better cardio fitness can feed back into the incentive programme which in turn drives behaviours, a virtuous cycle. The good news for the exercise averse is that significant health gains are on offer from slight improvements in VO? Max.
Banks, insurers and other financial institutions that offer reward programmes owe a great deal to the broader technology drivers that enable them. Aside from huge improvements in compute power and data storage, the likes of Discovery rely heavily on smartphones and wearable devices and the myriad application programming interfaces (APIs) that allow seamless data access and sharing with third party providers. Your clients will no doubt have experienced some of the tools that make healthier food choices possible.
Complex, but necessary
Although some financial advisers complain about the complexities that arise from the overlap of incentives and financial product, one gets the sense that clients can benefit from higher engagement around their health and wellness. You have no choice but to stay on top of these offerings because behaviour-linked wellness programmes could be pivotal in how your client’s risk is assessed, managed and priced. And the incentives help too.
“We realise surpluses from members doing the right thing,” concluded Mabunda. “That allows us to plough back into richer incentives, which in turn reinforce the behaviours that improve health and reduce risk.” Advisers can leverage the resulting virtuous cycle to help clients live longer, healthier and more financially secure lives.
Writer’s thoughts:
The mortality and morbidity benefits of diet, exercise and avoiding alcohol and tobacco are well documented. How should a financial adviser or healthcare broker go about discussing these sometimes-sensitive topics with clients? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
