Symbiotic relationships are arising as upstart companies breaking into the industry encounter challenges
While online tech platforms have upended industries from financial services to transportation, such digital disruptors are starting to take a more diplomatic approach to the life-insurance industry.
“[A]s insuretech ventures, as they are collectively known, have raked in growing sums of investment over the past couple of years, a nondisruptive business model has emerged as a path to success in life insurance,” reported the Wall Street Journal.
Typical Silicon Valley successes involve offering consumers with a product in a more accessible package than traditional providers have brought to market. But that approach is problematic in the life insurance space, where opening doors to less-healthy individuals could tank profits and removing requirements for blood and urine samples generally make higher premiums necessary. Another hurdle, according to the Journal, comes from capital requirements that regulators impose on life-insurance industry players.
Rather than try to replace traditional life insurers, a number of companies are seeking success through symbiotic relationships. One such company is Health IQ, a California-based outfit that administers an online quiz to self-identified dieters, athletes, cyclists, and weightlifters looking to get life insurance. Those who get a passing grade stand to save thousands of dollars in premiums over the life of their policies.
“We’re not here to disrupt anybody, which is very un-Silicon Valley,” Health IQ Chief Executive Munjal Shah told the Journal. “We found that collaboration was the easier answer in this, and that was a bit antithetical to what a lot of other people were trying to do.”
Health IQ was originally conceived simply as a way to quantify a person’s health-consciousness, but Shah realized the potential in partnering with insurance firms after discovering a remarkable correlation. Based on a comparison of the death rates of high scorers against the death rate of the overall American population, he said, those who scored high on Health IQ tests had a lower risk of dying prematurely. He presented the correlations to Swiss Re AG, which agreed to take on the risk of backstopping life-insurance policies that Health IQ underwrites.
Health IQ has enhanced its screening process. Aside from taking the quiz, applicants must verify their healthy lifestyles by providing one-time access to their fitness-tracker results. To unlock the most savings, they must also agree to undergo a physical and let a doctor draw bodily fluids from them.
Other tech-based models are also taking root elsewhere. Policygenius.com, founded by its CEO Jennifer Fitzgerald, lets consumers learn about products, brands, and prices to comparison-shop; those who buy policies on the site move onto the books of traditional insurers. And similar to Health IQ, behaviour-tracking companies like Vitality are also linking with traditional life insurers to let people who lead healthy lifestyles pay lower premiums for their life and health insurance policies.